Unequal treatment of identical agents in cournot equilibrium

Oligopoly models where prior actions by firms affect subsequent marginal co sts have been useful in illuminating policy debates in areas such as antitr ust regulation, environmental protection, and international competition. We discuss properties of such models when a Cournot equilibrium occurs at the second stage. Aggregate production costs strictly decline with no change i n gross revenue or gross consumer surplus if the prior actions strictly inc rease the variance of marginal costs without changing the marginal-cost sum . Therefore, unless the cost of inducing second-stage asymmetry more than o ffsets this reduction in production costs, the private and social optima ar e asymmetric. (JEL D43, L13, L40).