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On the Dixit-Stiglitz Model of Monopolistic Competition as Enforcement Mechanisms

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  • d ASPREMONT, Claude

    (CORE, Université catholique de Louvain, B-1348 Louvain-la-Neuve, Belgium)

  • DOS SANTOS FERREIRA, Rodolphe

    (BETA, Universite Louis Pasteur, Strasbourg)

  • GERARD-VARET, Louis-André

    (GREQAM, Ecole des Hautes Etudes en Sciences Sociales, Marseille)

Abstract

We examine two variants of the monopolistic competition model of Dixit and Stiglitz (1993). One is a simple general equilibrium model with n produced monopolistic goods and a numeraire good, the other in an "enlarged model", that includes labor time an an addiitonal good. In the case of alarge n, it is reasonable to consider in both variants only the direct effects of individual pricing decisions on demand, neglecting all indirect effects, either through the price index or through income. However, for other cases, we show that all these indirect effects can be taken into account and explicit solutions obtained. The derivations are even simpler for the enlarged model.

Suggested Citation

  • d ASPREMONT, Claude & DOS SANTOS FERREIRA, Rodolphe & GERARD-VARET, Louis-André, 1994. "On the Dixit-Stiglitz Model of Monopolistic Competition as Enforcement Mechanisms," LIDAM Discussion Papers CORE 1994067, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:1994067
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