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Income concentration and market demand

Author

Listed:
  • Corrado Benassi
  • Alessandra Chirco
  • Marcella Scrimitore

Abstract

We analyze the effects of income concentration and income dispersion on market demand and its elasticity. We show that, following an increase in income concentration towards the middle (measured by variations in mean preserving spread), the increase in demand faced by firms which serve at the margin middle income consumers, is associated with an increase in price elasticity--accordingly, the positive effects of the size of the market becoming wider are amplified by a higher degree of competition. Our results hold for a large number of possible income distributions. Copyright 2002, Oxford University Press.

Suggested Citation

  • Corrado Benassi & Alessandra Chirco & Marcella Scrimitore, 2002. "Income concentration and market demand," Oxford Economic Papers, Oxford University Press, vol. 54(4), pages 584-596, October.
  • Handle: RePEc:oup:oxecpp:v:54:y:2002:i:4:p:584-596
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    Cited by:

    1. Corrado Benassi & Marcella Scrimitore, 2017. "Income Distribution in Network Markets," Journal of Industry, Competition and Trade, Springer, vol. 17(3), pages 251-271, September.
    2. C. Benassi & A. Chirco & C. Colombo, 2015. "Beyond the Uniform Distribution: Equilibrium Prices and Qualities in a Vertically Differentiated Duopoly," Working Papers wp1044, Dipartimento Scienze Economiche, Universita' di Bologna.
    3. Corrado Benassi & Alessandra Chirco, 2008. "An elasticity approach to equilibrium and preference concentration in the Hotelling game," Journal of Economics, Springer, vol. 94(2), pages 125-141, July.
    4. Diego Winkelried, 2005. "Income Distribution and the Size of the Informal Sector," Development and Comp Systems 0512005, EconWPA.
    5. Marcella Scrimitore, 2003. "Symmetric and Asymmetric Equilibria in a Spatial Duopoly," ERSA conference papers ersa03p194, European Regional Science Association.
    6. Ronald Fischer & Diego Huerta, 2015. "Economic Performance, Wealth Distribution and Credit Restrictions Under Variable Investment: The Open Economy," Working Papers Central Bank of Chile 765, Central Bank of Chile.

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