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

Abstract

This paper builds a general oligopolistic equilibrium model to investigate how withinsector 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.

Ten Years of General Oligopolistic Equilibrium: A Survey

“…The integer problem concerning n has been neglected. See Colacicco () for a different GOLE perspective. There I augment Neary (,d), by allowing for asymmetric costs in each sector producing horizontally differentiated goods, along the lines of Vives ().…”