Cost manipulation games in oligopoly, with costs of manipulating

We analyze a class of two-stage games where rival firms incur real resource costs in manipulating their marginal costs, so as to influence the outcome of the game they want to play in stage two. Marginal costs may be manipula ted by various means, such as redistribution of productive assets, choice o f location, or creation of an internal input market. A general formulation of the game is provided, and several applications are analyzed. We show tha t the optimal allocation of resources within an oligopoly can be asymmetric , even for ex-ante symmetric films. This is an additional explanation of he terogeneity in oligopoly.