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On Monopolistic Competition and Optimal Product Diversity: a Comment on Cost Structure and Workers' Rents

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  • Pierre M. Picard
  • Eric Toulemonde

Abstract

In the Dixit-Stiglitz model of monopolistic competition, entry of firms is socially too small. Other authors have shown that excess entry is also a possibility with other preferences for diversity. We show that the cost structure and workers's rents can also explain excess entry.

Suggested Citation

  • Pierre M. Picard & Eric Toulemonde, 2005. "On Monopolistic Competition and Optimal Product Diversity: a Comment on Cost Structure and Workers' Rents," Cahiers de Recherches Economiques du Département d'économie 05.02, Université de Lausanne, Faculté des HEC, Département d’économie.
    • Handle: RePEc:lau:crdeep:05.02
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    5. Gianmarco Ottaviano & Takatoshi Tabuchi & Jacques-François Thisse, 2021. "Agglomeration And Trade Revisited," World Scientific Book Chapters, in: Firms and Workers in a Globalized World Larger Markets, Tougher Competition, chapter 3, pages 59-85, World Scientific Publishing Co. Pte. Ltd..
    6. 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.
    7. P M Picard & E Toulemonde, 2005. "On Monopolistic Competition and Optimal Product Diversity: A Comment on Cost Structure and Workers' Rents," Economics Discussion Paper Series 0518, Economics, The University of Manchester.
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    14. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
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    1. P M Picard & E Toulemonde, 2005. "On Monopolistic Competition and Optimal Product Diversity: A Comment on Cost Structure and Workers' Rents," Economics Discussion Paper Series 0518, Economics, The University of Manchester.

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    More about this item

    Keywords

    monopolistic competition; product diversity;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure

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