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The "Average" Within-Sector Firm Heterogeneity in General Oligopolistic Equilibrium

  • Colacicco, Rudy

This paper builds a general oligopolistic equilibrium model to investigate how within-sector firm heterogeneities affect wage rate, country-wide profits, and welfare. Using linear inverse demands, I consider asymmetric sectors, each involving n Cournot oligopolists producing horizontally differentiated varieties with constant, though asymmetric, costs. I link a measure of the average within-sector firm heterogeneity with the economy-wide, endogenously determined, and competitive wage rate. For interior equilibriums, the higher the "average" the lower the wage rate. Once general equilibrium feedbacks from wage rate are considered, the "average" has an unclear impact on country-wide profits and welfare, depending on moments of the technology distribution as well as demand parameters. The findings have implications to better understand antitrust and related policies.

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File URL: https://mpra.ub.uni-muenchen.de/40212/1/MPRA_paper_40212.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 40212.

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Date of creation: 21 Jul 2012
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Handle: RePEc:pra:mprapa:40212
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