Substitutability and Competition in the Dixit-Stiglitz Model
AbstractThe effects of competition on growth are analyzed in the recent literature by comparing economies with the same market structure but different degrees of substitutability. In this note, we show that in a general equilibrium model with monopolistic competition à la Dixit-Stiglitz the effect of substitutability on the allocation of resources is independent of the associated change in competition. Higher substitutability increases welfare, output and productivity because resources shift towards the most productive sectors. However, since markups are equal across sectors, changes in market power do not a.ect the relative price of consumption goods, implying that the induced changes in market power do not have any direct effect on equilibrium allocations.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by European University Institute in its series Economics Working Papers with number ECO2004/05.
Date of creation: 2004
Date of revision:
Contact details of provider:
Postal: Badia Fiesolana, Via dei Roccettini, 9, 50016 San Domenico di Fiesole (FI) Italy
Web page: http://www.eui.eu/ECO/
More information through EDIRC
Other versions of this item:
- Winfried Koeniger & Omar Licandro, . "Substitutability and Competition in the Dixit-Stiglitz Model," Working Papers 2004-06, FEDEA.
- Koeniger, Winfried & Licandro, Omar, 2004. "Substitutability and Competition in the Dixit-Stiglitz Model," IZA Discussion Papers 1007, Institute for the Study of Labor (IZA).
- O3 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights
- L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
- D5 - Microeconomics - - General Equilibrium and Disequilibrium
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-02-08 (All new papers)
- NEP-COM-2004-02-08 (Industrial Competition)
- NEP-DEV-2004-02-08 (Development)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Dixit, Avinash K & Stiglitz, Joseph E, 1977.
"Monopolistic Competition and Optimum Product Diversity,"
American Economic Review,
American Economic Association, vol. 67(3), pages 297-308, June.
- Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics.
- Chad Syverson, 2004.
"Product Substitutability and Productivity Dispersion,"
The Review of Economics and Statistics,
MIT Press, vol. 86(2), pages 534-550, May.
- Chad Syverson, 2003. "Product Substitutability and Productivity Dispersion," NBER Working Papers 10049, National Bureau of Economic Research, Inc.
- Piercarlo Zanchettin & Vincenzo Denicolò, 2004. "Competition and Growth in Neo-Schumpeterian Models," Discussion Papers in Economics 04/28, Department of Economics, University of Leicester.
- Helge Sanner, 2009. "Economy vs. history," The Annals of Regional Science, Springer, vol. 43(2), pages 283-306, June.
- José A. Herce, . "Could this ever happen in Spain? Economic and policy aspects of a SARS-like episode," Working Papers 2004-09, FEDEA.
- Simon Sosvilla-Rivero & Pedro Rodriguez, 2010.
"Linkages in international stock markets: evidence from a classification procedure,"
Taylor & Francis Journals, vol. 42(16), pages 2081-2089.
- Simon Sosvilla-Rivero & Pedro N. Rodríguez, . "Linkages in international stock markets: Evidence from a classification procedure," Working Papers 2004-23, FEDEA.
- Helge Sanner, 2004. "Economy vs. History: What Does Actually Determine the Distribution of Firms' Locations in Cities?," Volkswirtschaftliche DiskussionsbeitrÃ¤ge 67, Universität Potsdam, Wirtschafts- und Sozialwissenschaftliche Fakultät, revised Sep 2004.
- Helge Sanner, 2005. "Economy vs History - What Does Actually Determine the Distribution of Shops' Locations in Cities?," ERSA conference papers ersa05p175, European Regional Science Association.
- Malte Mosel, 2010. "Competition, Imitation, and R&D Productivity in a Growth Model with Sector-Specific Patent Protection," CESifo Working Paper Series 3109, CESifo Group Munich.
- Josheski, Dushko & Koteski, Cane & Lazarov, Darko, 2011. "Monopolistic competition: Critical evaluation the theory of monopolistic competition with specific reference to the seminal 1977 paper by Dixit and Stiglitz," MPRA Paper 33802, University Library of Munich, Germany.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marcia Gastaldo).
If references are entirely missing, you can add them using this form.