"A note on technology choice, firm heterogeneity and welfare"
JEL codes: D21, D43
Keywords: technology choice, Cournot oligopoly
Abstract: In this note I extend the technology choice model of Mills and Smith (1996) by analyzing an industry with more than two firms. I show that as in the duopoly case heterogeneous firms can arise. However, the welfare implications are not reobust. In particular, it is not necessarily the case that the market produces too much heterogeneity. When more than two firms are active, the existence of the business stealing effect creates a bias toward overinvestment.