A note on cost arrangement and market performance in a multi-product Cournot oligopoly

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.ijindorg.2005.09.001 Byline: Harvey E. Lapan, David A. Hennessy Keywords: Arrangement increasing; Complementarity; Invariance Abstract: Model invariances have been used extensively to understand welfare and conduct consequences of firm heterogeneity in a one-product Cournot oligopoly. Nothing is known about the richer and more realistic context of firm heterogeneity in multi-product Cournot oligopoly. In this note, welfare in a two-product Cournot oligopoly is shown to increase (decrease) with an increase in correlation between unit costs when the outputs complement (substitute) in demand. A more qualified correlation structure is required for the result to apply in a three-product Cournot oligopoly when products complement in demand. Author Affiliation: Department of Economics, 283 Heady Hall, Iowa State University Ames, IA 50011-1070, United States Article History: Received 28 January 2005; Revised 7 September 2005; Accepted 8 September 2005