Asymmetric oligopoly, international trade, and welfare: a synthesis

This paper analyzes the relationship between market shares and welfare under the assumption of Cournot-oligopolistic interdependence in production. The model is general enough to deal with multiple countries, oligopolists with different levels of marginal costs within each country, and any distribution of world demand across countries. It is found that the elimination of a “minor” firm harms the country if the country's total production is “very little.” However, such a policy always benefits the country if it exports the commodity. The welfare effect of production subsidies and the case of foreign ownership of firms are also discussed.