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Personal Income Distribution and Market Structure

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  • Corrado Benassi
  • Roberto Cellini
  • Alessandra Chirco

Abstract

Income distribution affects market demand and its elasticity, and, as a consequence, the optimal behaviour of firms and market equilibrium. This paper focuses on the effects of income polarization, and presents a model where – for any unimodal density function describing income distribution of the consumers – income polarization leads to market concentration, i.e., to a smaller number of firms able to survive in the long run, provided that the firms' fixed costs are sufficiently low.

Suggested Citation

  • Corrado Benassi & Roberto Cellini & Alessandra Chirco, 2002. "Personal Income Distribution and Market Structure," German Economic Review, Verein für Socialpolitik, vol. 3(3), pages 327-338, August.
    • Handle: RePEc:bla:germec:v:3:y:2002:i:3:p:327-338
    DOI: 10.1111/1468-0475.00062
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    References listed on IDEAS

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    1. Rabah Amir & Val E. Lambson, 2000. "On the Effects of Entry in Cournot Markets," Review of Economic Studies, Oxford University Press, vol. 67(2), pages 235-254.
    2. Roland Bénabou, 1996. "Inequality and Growth," NBER Chapters, in: NBER Macroeconomics Annual 1996, Volume 11, pages 11-92, National Bureau of Economic Research, Inc.
    3. repec:dau:papers:123456789/10091 is not listed on IDEAS
    4. Levy, Frank & Murnane, Richard J, 1992. "U.S. Earnings Levels and Earnings Inequality: A Review of Recent Trends and Proposed Explanations," Journal of Economic Literature, American Economic Association, vol. 30(3), pages 1333-1381, September.
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    6. Jenkins, Stephen P., 1995. "Did the middle class shrink during the 1980s? UK evidence from kernel density estimates," Economics Letters, Elsevier, vol. 49(4), pages 407-413, October.
    7. Cecilia Garcia-Penalosa & Eve Caroli & Philippe Aghion, 1999. "Inequality and Economic Growth: The Perspective of the New Growth Theories," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1615-1660, December.
    8. Hamilton, Stephen F., 1999. "Demand shifts and market structure in free-entry oligopoly equilibria," International Journal of Industrial Organization, Elsevier, vol. 17(2), pages 259-275, February.
    9. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
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    11. Roberts, John & Sonnenschein, Hugo, 1976. "On the existence of Cournot equilbrium without concave profit functions," Journal of Economic Theory, Elsevier, vol. 13(1), pages 112-117, August.
    12. Corrado Benassi & Roberto Cellini & Alessandra Chirco, 1999. "Market power under income polarization," Journal of Economics, Springer, vol. 69(3), pages 289-298, October.
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    Cited by:

    1. Osharin Alexander & Verbus Valery, 2015. "Heterogeneous consumers and market structure in a monopolistically competitive setting," EERC Working Paper Series 15/03e, EERC Research Network, Russia and CIS.
    2. Corrado Benassi & Alessandra Chirco, 2004. "Income Distribution, Price Elasticity and the ‘Robinson Effect’," Manchester School, University of Manchester, vol. 72(5), pages 591-600, September.

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