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Statistical moments analysis of production and welfare in multi-product Cournot oligopoly

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

Abstract

Our context involves N Cournot oligopolists producing M products at constant marginal costs when preferences are quasilinear. We identify relationships between second moments of unit costs and second moments of firm-level production. For example, a larger variance in unit costs of a product increases own output variance and the variance of any other output. We also investigate how second moments of unit costs affect industry cost efficiency. Industry costs can rise if the wrong firm secures a cost reduction. For quadratic preferences, it is shown that Zhao's (Zhao, J., 2001. A characterization for the negative welfare effects of cost reduction in Cournot oligopoly. International Journal of Industrial Organization 19, 455–469 (3–4, March)) share criteria for an increase in unit costs to increase welfare extend to the multi-product setting.

Suggested Citation

  • Lapan, Harvey E. & Hennessy, David A., 2008. "Statistical moments analysis of production and welfare in multi-product Cournot oligopoly," ISU General Staff Papers 200803010800001156, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genstf:200803010800001156
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    Cited by:

    1. Jiang, Jun & Shang, Pengjian & Zhang, Zuoquan & Li, Xuemei, 2018. "The multi-scale high-order statistical moments of financial time series," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 512(C), pages 474-488.
    2. Wang, X. Henry & Zhao, Jingang, 2022. "Merger effects in asymmetric and differentiated Bertrand oligopolies," Mathematical Social Sciences, Elsevier, vol. 120(C), pages 37-49.

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