Free Entry in a Cournot Market with Imperfectly Substituting Goods

Two results are shown about the free-entry equilibrium in a Cournot market with asymmetric firms and imperfectly substituting goods. First, only one technology will survive in the production of each good. Second, some good( s) may not be produced. Specifically, we show that in a two-good model only one good is produced if the substitution parameter is higher than a critical value and both goods are produced for smaller substitution parameter values.