Trade, Firm Size, and Product Variety under Monopolistic Competition
AbstractMonopolistic competition is used to examine rationalization behavior in response to market integration. A particular second-order condition on demand functions for differentiated products must be satisfied to generate an increase in firm size with an associated decline in equilibrium price when market size increases. For identical products, the firm size increase is guaranteed. The number of firms increases less than it does in proportion to market size for identical products, but may increase more than in proportion to market size for differentiated products. The latter results implies that market integration need not lead to exit of firms.
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Bibliographic InfoArticle provided by Canadian Economics Association in its journal Canadian Journal of Economics.
Volume (Year): 24 (1991)
Issue (Month): 1 (February)
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Postal: Canadian Economics Association Prof. Steven Ambler, Secretary-Treasurer c/o Olivier Lebert, CEA/CJE/CPP Office C.P. 35006, 1221 Fleury Est Montréal, Québec, Canada H2C 3K4
Web page: http://economics.ca/cje/
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