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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.

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Bibliographic Info

Paper provided by Université de Lausanne, Faculté des HEC, DEEP in its series Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) with number 05.02.

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Length: 10 pages
Date of creation: Feb 2005
Date of revision:
Handle: RePEc:lau:crdeep:05.02

Contact details of provider:
Postal: Université de Lausanne, Faculté des HEC, DEEP, Internef, CH-1015 Lausanne
Phone: ++41 21 692.33.64
Fax: ++41 21 692.33.05
Email:
Web page: http://www.hec.unil.ch/deep/publications/cahiers/series
More information through EDIRC

Related research

Keywords: monopolistic competition; product diversity;

Other versions of this item:

Find related papers by JEL classification:

• D43 - Microeconomics - - Market Structure and Pricing - - - 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

This paper has been announced in the following NEP Reports:

• NEP-ALL-2005-07-03 (All new papers)
• NEP-COM-2005-07-03 (Industrial Competition)
• NEP-IND-2005-07-03 (Industrial Organization)

References

References listed on IDEAS
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.:

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1. Benassy, Jean-Pascal, 1996. "Taste for variety and optimum production patterns in monopolistic competition," Economics Letters, Elsevier, vol. 52(1), pages 41-47, July.
2. Hanson, G.H., 1999. "`Market Potential, Increasing Returns, and Geographic Concentration," Working Papers 439, Research Seminar in International Economics, University of Michigan.
   
   • H. Hanson, Gordon, 2005. "Market potential, increasing returns and geographic concentration," Journal of International Economics, Elsevier, vol. 67(1), pages 1-24, September.
   • Gordon H. Hanson, 1998. "Market Potential, Increasing Returns, and Geographic Concentration," NBER Working Papers 6429, National Bureau of Economic Research, Inc.
3. Thierry Mayer & Keith Head, 2003. "The Empirics of Agglomeration and Trade," Working Papers 2003-15, CEPII research center.
   
   • Head, Keith & Mayer, Thierry, 2004. "The empirics of agglomeration and trade," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 59, pages 2609-2669 Elsevier.
   • Head, Charles Keith & Mayer, Thierry, 2003. "The Empirics of Agglomeration and Trade," CEPR Discussion Papers 3985, C.E.P.R. Discussion Papers.
4. 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.
   
   • 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.
5. P Picard & E Toulemonde, 2001. "Unions and Firms Agglomeration," The School of Economics Discussion Paper Series 0104, Economics, The University of Manchester.
6. Head, Keith & Mayer, Thierry, 2004. "Empirics of Agglomeration and Trade," Open Access publications from Sciences Po info:hdl:2441/10191, Sciences Po.
7. Akerlof, George A & Yellen, Janet L, 1990. "The Fair Wage-Effort Hypothesis and Unemployment," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 255-83, May.
8. d'Aspremont, Claude & Dos Santos Ferreira, Rodolphe & Gerard-Varet, Louis-Andre, 1996. "On the Dixit-Stiglitz Model of Monopolistic Competition," American Economic Review, American Economic Association, vol. 86(3), pages 623-29, June.
9. 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'Econométrie et d'Economie politique (DEEP) 05.02, Université de Lausanne, Faculté des HEC, DEEP.
   
   • PICARD, Pierre M. & TOULEMONDE, Eric, 2005. "On monopolistic competition and optimal product diversity: a comment on cost structure and workers’rents," CORE Discussion Papers 2005016, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
   • P M Picard & E Toulemonde, 2005. "On Monopolistic Competition and Optimal Product Diversity: A Comment on Cost Structure and Workers' Rents," The School of Economics Discussion Paper Series 0518, Economics, The University of Manchester.
10. Gans, J.S., 1995. "Fixed Cost Assumptions," Papers 95/47, New South Wales - School of Economics.
11. d’ASPREMONT, Cl. & DOS SANTOS FERREIRA, R. & GERARD-VARET, L.-A., 1988. "Unemployment in a Cournot oligopoly model with Ford effects," CORE Discussion Papers 1988018, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
12. Xavier Vives, 2001. "Oligopoly Pricing: Old Ideas and New Tools," MIT Press Books, The MIT Press, edition 1, volume 1, number 026272040x.
13. Solow, Robert M., 1979. "Another possible source of wage stickiness," Journal of Macroeconomics, Elsevier, vol. 1(1), pages 79-82.
14. Benassy, Jean-Pascal, 1991. "Monopolistic competition," Handbook of Mathematical Economics, in: W. Hildenbrand & H. Sonnenschein (ed.), Handbook of Mathematical Economics, edition 1, volume 4, chapter 37, pages 1997-2045 Elsevier.
15. 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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Cited by:

1. 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'Econométrie et d'Economie politique (DEEP) 05.02, Université de Lausanne, Faculté des HEC, DEEP.
   
   • PICARD, Pierre M. & TOULEMONDE, Eric, 2005. "On monopolistic competition and optimal product diversity: a comment on cost structure and workers’rents," CORE Discussion Papers 2005016, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
   • P M Picard & E Toulemonde, 2005. "On Monopolistic Competition and Optimal Product Diversity: A Comment on Cost Structure and Workers' Rents," The School of Economics Discussion Paper Series 0518, Economics, The University of Manchester.

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