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Preferences and income effects in monopolistic competition models

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  • Alexander Tarasov

Abstract

This paper develops a novel approach to modeling preferences in monopolistic competition models with a continuum of goods. In contrast to the commonly used constant elasticity of substitution preferences, which do not capture the effects of consumer income and the intensity of competition on equilibrium prices, the present preferences can capture both effects. The relationship between consumers’ incomes and product prices is then analyzed for two cases: with and without income heterogeneity. Copyright Springer-Verlag Berlin Heidelberg 2014

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  • Alexander Tarasov, 2014. "Preferences and income effects in monopolistic competition models," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 42(3), pages 647-669, March.
    • Handle: RePEc:spr:sochwe:v:42:y:2014:i:3:p:647-669
    DOI: 10.1007/s00355-013-0748-9
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    3. Ikuto Aiba, 2024. "Information technology, market congestion, and economic geography," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 73(3), pages 1269-1295, October.
    4. Ushchev, Philip & Zenou, Yves, 2018. "Price competition in product variety networks," Games and Economic Behavior, Elsevier, vol. 110(C), pages 226-247.
    5. Malykhin, Nikita & Ushchev, Philip, 2018. "How market interactions shape the city structure," Regional Science and Urban Economics, Elsevier, vol. 71(C), pages 122-136.
    6. Sergey Kokovin & Alina Ozhegova & Shamil Sharapudinov & Alexander Tarasov & Philip Ushchev, 2024. "A Theory of Monopolistic Competition with Horizontally Heterogeneous Consumers," American Economic Journal: Microeconomics, American Economic Association, vol. 16(2), pages 354-384, May.
    7. Nikita Malykhin & Philip Ushchev, 2016. "Clustering or Co-Agglomeration? A Love-for-Variety Approach," HSE Working papers WP BRP 140/EC/2016, National Research University Higher School of Economics.

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