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Economic distributions, primitive distributions, and demand recovery in monopolistic competition

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  • Anderson, Simon P.
  • de Palma, André

Abstract

We link fundamental technological and taste distributions to endogenous economic distributions of prices and firm size (output, profit) generated under monopolistic competition with heterogeneous productivities as per recent Trade and Industrial Organization models. We derive full equivalence properties for monopoly mark-ups, demand shape, marginal revenue, and profits to match distributions of cost, price, output, and profit under monopolistic competition. Demand and one distribution determine the rest. We provide constructive proofs to recover demand and all distributions from just two (e.g., price and cost distributions uncover demand form), and derive restrictions on distribution pairs. Finally, we extend to analyze mark-up distributions.

Suggested Citation

  • Anderson, Simon P. & de Palma, André, 2024. "Economic distributions, primitive distributions, and demand recovery in monopolistic competition," Journal of Economic Theory, Elsevier, vol. 217(C).
    • Handle: RePEc:eee:jetheo:v:217:y:2024:i:c:s0022053124000292
    DOI: 10.1016/j.jet.2024.105823
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    Keywords

    Primitive and economic distributions; Monopoly; Monopolistic competition; Pass-through and demand recovery; Mark-up; Price and profit dispersion;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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