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Monopolistic Competition and Preference Diversity

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  • Raymond Deneckere
  • Michael Rothschild

Abstract

This paper presents a general model of the demand for differentiated products which has as special cases two popular models used to analyze welfare and competition in monopolistically competitive markets: the model of spatial competition and the symmetric aggregate benefit function approach. The authors model is especially attractive because it starts from economic primitives: a specification of the set of possible individual preference patterns. It shows how specific properties of the distribution of preferences translate into properties of aggregate demand. This allows the authors to understand the relationship between the distribution of preferences and the degree to which the market introduces biases in product selection. Copyright 1992 by The Review of Economic Studies Limited.

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Paper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number 684.

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Date of creation: Feb 1986
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Handle: RePEc:nwu:cmsems:684

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  1. Perloff, Jeffrey M & Salop, Steven, 1984. "Equilibrium with product differentiation," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt4cq0m6s3, Department of Agricultural & Resource Economics, UC Berkeley.
  2. Feenstra, Robert C & Judd, Kenneth L, 1982. "Tariffs, Technology Transfer, and Welfare," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1142-65, December.
  3. Judd, Kenneth L, 1985. "On the Performance of Patents," Econometrica, Econometric Society, vol. 53(3), pages 567-85, May.
  4. Spence, Michael, 1976. "Product Selection, Fixed Costs, and Monopolistic Competition," Review of Economic Studies, Wiley Blackwell, vol. 43(2), pages 217-35, June.
  5. Venables, Anthony J., 1982. "Optimal tariffs for trade in monopolistically competitive commodities," Journal of International Economics, Elsevier, vol. 12(3-4), pages 225-241, May.
  6. Sattinger, Michael, 1984. "Value of an Additional Firm in Monopolistic Competition," Review of Economic Studies, Wiley Blackwell, vol. 51(2), pages 321-32, April.
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