Monopolistic competition in general equilibrium: beyond the CES
AbstractWe propose a general model of monopolistic competition and derive a complete characterization of the market equilibrium using the concept of Relative Love for Variety. When the RLV increases with individual consumption, the market generates pro-competitive effects. When it decreases, the market mimics anti-competitive behavior. The CES is a borderline case. We extend our setting to heterogeneous firms and show that the cutoff cost decreases (increases) when the RLV increases (decreases). Last, we study how combining vertical, horizontal and cost heterogeneity affects our results.
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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 2011010.
Date of creation: 01 Feb 2011
Date of revision:
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monopolistic competition; additive preferences; love for variety; heterogeneous firms;
Other versions of this item:
- Evgeny Zhelobodko & Sergey Kokovin & Mathieu Parenti & Jacques-François Thisse, 2011. "Monopolistic Competition in General Equilibrium: Beyond the CES," CREA Discussion Paper Series 11-03, Center for Research in Economic Analysis, University of Luxembourg.
- Evgeny Zhelobodko & Sergey Kokovin & Mathieu Parenti & Jacques-François Thisse, 2011. "Monopolistic Competition in General Equilibrium: Beyond the CES," Discussion Paper Series DP2011-16, Research Institute for Economics & Business Administration, Kobe University.
- Evgeny Zhelobodko & Sergey Kokovin & Mathieu Parenti & Jacques-François Thisse, 2011. "Monopolistic competition in general equilibrium: Beyond the CES," PSE Working Papers halshs-00566431, HAL.
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-05-14 (All new papers)
- NEP-CBA-2011-05-14 (Central Banking)
- NEP-COM-2011-05-14 (Industrial Competition)
- NEP-IND-2011-05-14 (Industrial Organization)
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- Lu, Yi & Tao, Zhigang & Yu, Linhui, 2011. "Agglomeration and Markup," MPRA Paper 38974, University Library of Munich, Germany, revised May 2012.
- Yoshitsugu Kanemoto, 2012. "Cost-Benefit Analysis in Monopolistic Competition Models of Urban Agglomeration," GRIPS Discussion Papers 12-04, National Graduate Institute for Policy Studies.
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