A Note on ‘Strategic Choice of flexible Production Technologies and Welfare Implications’

This note corrects certain errors in welfare calculations and graphs of a paper by Roller and Tombak (JIE, 1990). The corrections necessitate a re-interpretation of some of their results. Contrary to authors' assertion (Proposition 1), consumer surplus is not always the highest in (FMS, FMS) state. Producing in both markets imposes a negative externality that grows as products become more substitutable, leading to a reduction in output levels. Secondly, corrected graphs reveal that the di erence in producers' and total surplus between (DE, DE) and (FMS, FMS) states is not as large as depicted by the authors. I thank Professor Richard Loulou for his invaluable encouragement, guidance, and support. Any errors are solely mine.