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Cost Manipulation Games in Oligopoly, With Costs of Manipulating
Author(s) -
Van Long Ngo,
Soubeyran Antoine
Publication year - 2001
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/1468-2354.00119
Subject(s) - oligopoly , marginal cost , microeconomics , economics , outcome (game theory) , redistribution (election) , ex ante , resource allocation , resource (disambiguation) , marginal product , sequential game , game theory , mathematical economics , computer science , cournot competition , production (economics) , market economy , computer network , politics , political science , law , macroeconomics
We analyze a class of two‐stage games where rival firms incur real resource costs in manipulating their marginal costs, so as to influence the outcome of the game they want to play in stage two. Marginal costs may be manipulated by various means, such as redistribution of productive assets, choice of location, or creation of an internal input market. A general formulation of the game is provided, and several applications are analyzed. We show that the optimal allocation of resources within an oligopoly can be asymmetric, even for ex‐ante symmetric firms. This is an additional explanation of heterogeneity in oligopoly.