The Complete Welfare Effects of Cost Reductions in a Cournot Oligopoly

Smythe, Donald J.; Zhao, Jingang

doi:10.1007/s00712-005-0166-2

Cited by 4 publications

(2 citation statements)

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“…Our contribution extends the literature on the welfare impacts of cost asymmetries across firms (Lahiri and Ono, 1988;Zhao, 2001;Smythe and Zhao, 2006;Wang and Zhao, 2007). The existing contributions study the effects of a cost reduction in linear Cournot markets when firms have exogenous and asymmetric production costs.…”

Section: Related Literaturementioning

confidence: 81%

“…Lahiri and Ono (1988), Zhao (2001), Smythe and Zhao (2006) and Wang and Zhao (2007) also found that a technological improvement in an inefficient firm may reduce total surplus. Intuitively, the reason is that this improvement leads to a shift in production from a more efficient to an inefficient firm, with an increase in average production costs.…”

Section: Increases Total Surplus If Affecting Firm L If and Only If Tmentioning

confidence: 96%

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Productivity Shocks in a Union‐Duopoly Model

Brandão

Pinho²

2018

The Manchester School

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We study the impacts of idiosyncratic productivity shocks when: firms have asymmetric productivities; firms and unions bargain over wages; and firms decide employment. The efficient firm pays a higher wage but has lower marginal production costs (due to its productivity advantage). Profits and worker surplus are higher at the efficient firm. A positive productivity shock affecting the efficient firm is always welfare improving; while if affecting the inefficient firm it may be welfare detrimental (if consumers' gain does not compensate the loss in worker surplus and industry profit). Consumer surplus increases more when the productivity shock affects the inefficient firm.

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Section: Related Literaturementioning

confidence: 81%