Cost Variations in a Differentiated Good Oligopoly

Abstract

In the homogenous good case, the relationship between market struc- ture and efficiency was studied extensively. Assuming a standard quadratic utility with quantity competition, this paper carries on the analysis in a differentiated good context. It can be shown that there is a positive re- lationship between market heterogeneity and efficiency, too. In contrast to the homogenous good case, consumer surplus as well as producer surplus increases with the dispersion of marginal costs.Differentiated goods; Cournot; Asymmetric costs; Cost variation; Welfare