Working Paper No. 1537

Multi-Product Supply Function Equilibria

Working Paper
Reference
Holmberg, Pär, Keith Ruddell and Bert Willems (2025). “Multi-Product Supply Function Equilibria”. IFN Working Paper No. 1537. Stockholm: Research Institute of Industrial Economics (IFN).

Authors
Pär Holmberg, Keith Ruddell, Bert Willems

We characterize Nash equilibria in multi-product markets in which producers commit to vectors of supply functions contingent on all prices. The framework accommodates (dis)economies of scope in production, and goods may be substitutes or complements in demand. We show that equilibrium allocations of underlying goods and payoffs are invariant under bundling. With quadratic costs and linear demand, this invariance reduces the multi-product problem to an equivalent set of single-product markets that can be analyzed independently. We introduce Lerner and pass-through matrices to capture markups and welfare losses; their eigenvalues summarize fundamental market properties, remain invariant under bundling, and lend themselves to comparative statics analysis.

Pär Holmberg

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