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.
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Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number
12720.
Length: Date of creation: 14 Feb 2007 Date of revision: Publication status: Published in International Journal of Industrial Organization, May 2006, Vol. 24, No. 3, pp. 583-591. Handle: RePEc:isu:genres:12720
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