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Monopolistic Competition and General Purpose Products

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  • Thomas von Ungern-Sternberg

Abstract

Most models of monopolistic competition study the question of the "optimal degree of product differentiation" by looking at the number of firms that will locate in characteristics space. This is somewhat restrictive. The development of "general purpose" products means that the needs of quite heterogenous consumers can be satisfied with the same homogenous product. The private and social incentives to produce "general purpose" products are studied in this paper within the "circular-road-model" of monopolistic competition. The degree of general purposeness of a product is approximated by its per unit distance transport costs. It is shown that there are strong forces leading the market to supply products whose transport costs are excessively low.

Suggested Citation

  • Thomas von Ungern-Sternberg, 1988. "Monopolistic Competition and General Purpose Products," Review of Economic Studies, Oxford University Press, vol. 55(2), pages 231-246.
  • Handle: RePEc:oup:restud:v:55:y:1988:i:2:p:231-246.
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    File URL: http://hdl.handle.net/10.2307/2297579
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    References listed on IDEAS

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    1. Hugo Sonnenschein, 1968. "The Dual of Duopoly Is Complementary Monopoly: or, Two of Cournot's Theories Are One," Journal of Political Economy, University of Chicago Press, vol. 76, pages 316-316.
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    Cited by:

    1. Degryse, Hans & Irmen, Andreas, 2001. "Attribute dependence and the provision of quality," Regional Science and Urban Economics, Elsevier, vol. 31(5), pages 547-569, September.
    2. repec:kap:revind:v:52:y:2018:i:1:d:10.1007_s11151-017-9568-x is not listed on IDEAS
    3. Dos Santos Ferreira, Rodolphe & Thisse, Jacques-Francois, 1996. "Horizontal and vertical differentiation: The Launhardt model," International Journal of Industrial Organization, Elsevier, vol. 14(4), pages 485-506, June.
    4. Matsumura, Toshihiro & Matsushima, Noriaki, 2007. "Congestion-reducing investments and economic welfare in a Hotelling model," Economics Letters, Elsevier, vol. 96(2), pages 161-167, August.
    5. Nelson Sá, 2015. "Market concentration and persuasive advertising: a theoretical approach," Journal of Economics, Springer, vol. 114(2), pages 127-151, March.
    6. Hendel, Igal & de Figueiredo, John Neiva, 1997. "Product differentiation and endogenous disutility," International Journal of Industrial Organization, Elsevier, vol. 16(1), pages 63-79, November.
    7. Nakayama, Yuji, 2001. "Spatial Competition and Accumulation of Public Capital," Discussion Paper 34, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
    8. Bar-Isaac, Heski & Caruana, Guillermo & Cuñat, Vicente, 2011. "Locating inside the Salop circle: demand rotations in a micro-founded model," LSE Research Online Documents on Economics 43163, London School of Economics and Political Science, LSE Library.
    9. Doraszelski, Ulrich & Draganska, Michaela, 2003. "Market Segmentation Strategies of Multiproduct Firms," Research Papers 1827, Stanford University, Graduate School of Business.
    10. Hou, Haiyang & Wu, Xiaobo & Zhou, Weihua, 2013. "The competition of investments for endogenous transportation costs in a spatial model," Economic Modelling, Elsevier, vol. 31(C), pages 574-577.
    11. Sällström, Susanna, 2009. "Functional Differentiation," CEPR Discussion Papers 7187, C.E.P.R. Discussion Papers.
    12. Sencer Ecer, 2003. "Sequential Product Design," Netnomics, Springer, vol. 5(1), pages 33-42, May.
    13. Nikolaos Georgantzís & Gerardo Sabater-Grande, 2002. "Market Transparency and Collusion: On the UK Agricultural Tractor Registration Exchange," European Journal of Law and Economics, Springer, vol. 14(2), pages 129-150, September.
    14. Aoki, Reiko & Hillas, John & Kao, Tina, 2014. "Product Customization in the Spokes Model," CEI Working Paper Series 2014-8, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.

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