Competition between Multiproduct Firms with Heterogeneous Costs

Roberto Roson (Department of Economics, University Of Venice Ca Foscari) addresses Competition between Multiproduct Firms with Heterogeneous Costs.

ABSTRACT: This paper draws upon Feenstra and Ma (2007, 2008), to develop a model of asymmetric competition between multiproduct firms. The model is used to analyze how cost asymmetry affects the equilibrium, with determination of quantity/price as well as product scope per firm. By treating the number of firms as a continuous variable, the model is extended to account for the endogenous determination of the number of firms in a long-run, monopolistically competitive equilibrium, with free entry by heterogeneous firms.