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From Local to Global Competition

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  • Simon P. Anderson

    ()

  • Andre de Palma

    ()

Abstract

This paper lays out and elaborates upon the properties of an extended Chamberlinian model with applications both in Industrial Organization and Economic Geography/ Urban Economics. The framework is used to explain the impact of some major changes over the last two centuries: reductions in transport costs, increased taste for variety, population growth, and use of technologies with greater returns to scale. To this end, we introduce a framework that has known models of oligopolistic competition with differentiated products as limit cases. These limit models include the circle, the logit, and the CES models. The integrative approach incorporates both localized and global competition, as well as price-sensitive individual.

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File URL: http://www.virginia.edu/economics/RePEc/vir/virpap/papers/virpap344.pdf
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Bibliographic Info

Paper provided by University of Virginia, Department of Economics in its series Virginia Economics Online Papers with number 344.

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Length: 35 pages
Date of creation: May 1998
Date of revision:
Handle: RePEc:vir:virpap:344

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Web page: http://www.virginia.edu/economics/home.html

Related research

Keywords: Product Differentiation; Economic Geography; Spatial Competition; Localization; Monopolistic Competition;

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References

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  1. Caplin, A. & Nalebuff, B., 1989. "Aggregation And Imperfect Competition: On The Existence Of Equilibrium," Discussion Papers, Columbia University, Department of Economics 1989_30, Columbia University, Department of Economics.
  2. Perloff, Jeffrey M & Salop, Steven C, 1985. "Equilibrium with Product Differentiation," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 52(1), pages 107-20, January.
  3. Goldberg, Pinelopi Koujianou, 1995. "Product Differentiation and Oligopoly in International Markets: The Case of the U.S. Automobile Industry," Econometrica, Econometric Society, Econometric Society, vol. 63(4), pages 891-951, July.
  4. de Palma, A, et al, 1985. "The Principle of Minimum Differentiation Holds under Sufficient Heterogeneity," Econometrica, Econometric Society, Econometric Society, vol. 53(4), pages 767-81, July.
  5. Eaton, B Curtis & Lipsey, Richard G, 1978. "Freedom of Entry and the Existence of Pure Profit," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 88(351), pages 455-69, September.
  6. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, American Economic Association, vol. 67(3), pages 297-308, June.
  7. B. Curtis Eaton & Myrna Holtz Wooders, 1985. "Sophisticated Entry in a Model of Spatial Competition," RAND Journal of Economics, The RAND Corporation, vol. 16(2), pages 282-297, Summer.
  8. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, Econometric Society, vol. 63(4), pages 841-90, July.
  9. Deneckere, Raymond J & Rothschild, Michael, 1992. "Monopolistic Competition and Preference Diversity," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 59(2), pages 361-73, April.
  10. Feenstra, Robert C & Levinsohn, James A, 1995. "Estimating Markups and Market Conduct with Multidimensional Product Attributes," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 62(1), pages 19-52, January.
  11. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
  12. Economides, Nicholas, 1989. "Symmetric equilibrium existence and optimality in differentiated product markets," Journal of Economic Theory, Elsevier, Elsevier, vol. 47(1), pages 178-194, February.
  13. Anderson, S. P. & De Palma, A. & Nesterov, Y., . "Oligopolistic competition and the optimal provision of products," CORE Discussion Papers RP, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) -1179, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  14. Milgrom, Paul & Roberts, John, 1990. "Rationalizability, Learning, and Equilibrium in Games with Strategic Complementarities," Econometrica, Econometric Society, Econometric Society, vol. 58(6), pages 1255-77, November.
  15. Spence, Michael, 1976. "Product Selection, Fixed Costs, and Monopolistic Competition," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 43(2), pages 217-35, June.
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