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Monopolistic competition, multiproduct firms and optimum product diversity

Author

Listed:
  • OTTAVIANO, Gianmarco

    (Universita di Bologna, Italy, CORE, Louvain-la-Neuve, Belgium and CEPR)

  • THISSE, Jacques-François

    (Center for Operations Research and Econometrics (CORE), Université catholique de Louvain (UCL), 1348 Louvain la Neuve, Belgium)

Abstract

This paper tackles the issue of optimum product diversity in an imperfectly competitive market with small or large firms. First, it develops a quadratic utility model of monopolistic competition with horizontal product differentiation which avoids some of the main pitfalls of the S-D-S approach. Second, it extends the model to the case of multiproduct firms showing how product diversity is affected with respect to monopolistic competition. In particular, it is shown that monopolistic competition with single-product firms is the limiting case of oligopolistic competition with multiproduct firms when either varieties gets more and more differentiated or when the entry cost goes further and further down.

Suggested Citation

  • OTTAVIANO, Gianmarco & THISSE, Jacques-François, 1999. "Monopolistic competition, multiproduct firms and optimum product diversity," LIDAM Discussion Papers CORE 1999019, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvco:1999019
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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