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Market Size, Technology Choice, and Market Structure

  • Walter Elberfeld
  • Georg Götz

We introduce technology choice into a model of monopolistic competition and analyze the structural effects of changes in market size. A larger market leads to the adoption of a large-scale technology. If a technology switch occurs, the number of firms decreases, and a rationalizing effect arises: individual and aggregate output increases; prices fall. This need not benefit consumers since a technology switch is associated with a decrease in product variety. Copyright Verein fü Socialpolitik and Blackwell Publishers Ltd 2002.

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Article provided by Verein für Socialpolitik in its journal German Economic Review.

Volume (Year): 3 (2002)
Issue (Month): 1 (02)
Pages: 25-41

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Handle: RePEc:bla:germec:v:3:y:2002:i:1:p:25-41
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