DIFFERENTIATED DUOPOLY WITH ASYMMETRICCOSTS: NEW RESULTS FROM A SEMINAL MODEL

This paper re-considers the comparison of Bertrand and Cournot equilibria in a differentiatedduopoly with linear demand and cost functions. It focuses on the case of substitutegoods, and allows for cost asymmetries between firms. The main finding is that, when thedegree of cost asymmetry is sufficiently high and/or the degree of product differentiation issufficiently low, equilibrium profits of the efficient firm and the industry profits are higherunder price than under quantity competition...