This paper analyzes the problem of altering the cost structure within an oligopoly, in the presence of costs of manipulation. Oligopolistic firms (which differ from each other in production costs) compete a la Cournot in the second stage, taking as given firm-specific taxes or input prices. In...

This paper analyzes a class of two-stage Cournot games where firms are collusive in the first stage, and shows that oligopolists may have a strong incentive to redistribute resources (such as capital, pollution permits, etc) within the industry as a means of coordinating their output decision.