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Statistical Moments Analysis of Production and Profits in Multi-Product Cournot Oligopoly

  • Hennessy, David A.
  • Lapan, Harvey E.

Our context involves N firms producing M products at constant marginal costs, and behaving as Cournot oligopolists. When preferences are quasi-linear, we study the relationships between second moments of unit costs and second moments of firm-level production. Larger variance in unit costs of a product increases own output variance and variance of any other output. We also investigate how second moments of unit costs affect the first and second moments of profit across firms. Larger variance in unit costs can reduce profit variance, even for a single product oligopoly.

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File URL: http://www.econ.iastate.edu/sites/default/files/publications/papers/paper_12471_05030.pdf
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Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 12471.

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Date of creation: 08 Nov 2005
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Publication status: Published in International Journal of Industrial Organization, March 2008, vol. 26, pp. 598-606
Handle: RePEc:isu:genres:12471
Contact details of provider: Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
Phone: +1 515.294.6741
Fax: +1 515.294.0221
Web page: http://www.econ.iastate.edu
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  1. Tor Jakob Klette & Zvi Griliches, 1997. "Empirical Patters of Firm Growth and R&D Investment: A Quality Ladder Model Interpretation," Harvard Institute of Economic Research Working Papers 1795, Harvard - Institute of Economic Research.
  2. Zhao, Jingang, 2001. "A characterization for the negative welfare effects of cost reduction in Cournot oligopoly," International Journal of Industrial Organization, Elsevier, vol. 19(3-4), pages 455-469, March.
  3. Tor Jakob Klette & Zvi Griliches, 1998. "Empirical Patterns of Firm Growth and R&D Investment: A QuUality LadderModel Interpretation," NBER Working Papers 6753, National Bureau of Economic Research, Inc.
  4. Howitt, Peter & Griffith, Rachel & Aghion, Philippe & Blundell, Richard & Bloom, Nick, 2005. "Competition and Innovation: An Inverted-U Relationship," Scholarly Articles 4481507, Harvard University Department of Economics.
  5. Blonigen, Bruce A. & Tomlin, KaSaundra, 2001. "Size and growth of Japanese plants in the United States," International Journal of Industrial Organization, Elsevier, vol. 19(6), pages 931-952, May.
  6. Bergstrom, Theodore C. & Varian, Hal R., 1985. "Two remarks on Cournot equilibria," Economics Letters, Elsevier, vol. 19(1), pages 5-8.
  7. Ghemawat, Pankaj & Nalebuff, Barry, 1990. "The Devolution of Declining Industries," The Quarterly Journal of Economics, MIT Press, vol. 105(1), pages 167-86, February.
  8. Lapan, Harvey E. & Hennessy, David A., 2006. "A note on cost arrangement and market performance in a multi-product Cournot oligopoly," International Journal of Industrial Organization, Elsevier, vol. 24(3), pages 583-591, May.
  9. Dansby, Robert E & Willig, Robert D, 1979. "Industry Performance Gradient Indexes," American Economic Review, American Economic Association, vol. 69(3), pages 249-60, June.
  10. Fevrier, Philippe & Linnemer, Laurent, 2004. "Idiosyncratic shocks in an asymmetric Cournot oligopoly," International Journal of Industrial Organization, Elsevier, vol. 22(6), pages 835-848, June.
  11. Moschini, GianCarlo & Moro, D. & Green, Richard D., 1994. "Maintaining and Testing Separability in Demand Systems," Staff General Research Papers 11247, Iowa State University, Department of Economics.
  12. Greg Shaffer & Stephen W. Salant, 1999. "Unequal Treatment of Identical Agents in Cournot Equilibrium," American Economic Review, American Economic Association, vol. 89(3), pages 585-604, June.
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