SUBSIDIES IN OLIGOPOLY MARKETS - A WELFARE COMPARISON BETWEEN SYMMETRICAL AND ASYMMETRIC COSTS

This article studies welfare effects of uniform production subsidies i n oligopoly markets, comparing cases of symmetric and asymmetric costs . Cost asymmetry reduces the welfare impact relative to the symmetric- cost case if the demand function is concave and magnifies the impact i f demand is convex. The welfare difference increases with the degree o f market power and with the cost differential in the industry.