On the Dixit-Stiglitz Model of Monopolistic Competition as Enforcement Mechanisms
AbstractWe 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.
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Bibliographic InfoPaper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 1994067.
Date of creation: 01 Dec 1994
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