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Oligopolistic vs. monopolistic competition: do intersectoral effects matter?

Author

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  • d’ASPREMONT, Claude

    () (CORE, UniversitéCatholique de Louvain, Voie du Roman Pays 34, B-1348 Louvain-la-Neuve, Belgium)

  • DOS SANTOS FERRERIA, Rodolphe

    () (BETA, Université de Strasbourg, France, and FCEE, Universidade Cataolica Portuguesa, Lisbon, Portugal)

Abstract

Recent extensions of the standard Dixit-Stiglitz (1977) model, that go beyond the CES sub-utility assumption, while maintaining monopolistic competition, have mainly emphasized the role of iintrasectoral substitutability. We argue that introducing oligopolistic competition can be an alternative extension, still tractable, allowing to restore the role of intersectoral substitutability and reinforcing the general equilibrium dimension of the model. For this purpose, we use the concept of oligopolistic equilibrium and derive a comprehensive formula to characterize the set of potential equilibria with varying competitive toughness. For two particular competitive regimes, price competition and quantity competition, we show how, with strategic interactions, procompetitive or anti-competitive effects now depend on the elasticity of intersectoral substitution as compared to the elasticity of intrasectoral substitution.

Suggested Citation

  • d’ASPREMONT, Claude & DOS SANTOS FERRERIA, Rodolphe, 2015. "Oligopolistic vs. monopolistic competition: do intersectoral effects matter?," CORE Discussion Papers 2015002, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvco:2015002
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    References listed on IDEAS

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    1. Andrew Atkeson & Ariel Burstein, 2008. "Pricing-to-Market, Trade Costs, and International Relative Prices," American Economic Review, American Economic Association, vol. 98(5), pages 1998-2031, December.
    2. Claude d'Aspremont & Rodolphe Dos Santos Ferreira & Louis-André Gérard-Varet, 1990. "On Monopolistic Competition and Involuntary Unemployment," The Quarterly Journal of Economics, Oxford University Press, vol. 105(4), pages 895-919.
    3. Claude d'Aspremont & Rodolphe Dos Santos Ferreira & Louis-André Gérard-Varet, 2007. "Competition For Market Share Or For Market Size: Oligopolistic Equilibria With Varying Competitive Toughness," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(3), pages 761-784, August.
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    9. Evgeny Zhelobodko & Sergey Kokovin & Mathieu Parenti & Jacques‐François Thisse, 2012. "Monopolistic Competition: Beyond the Constant Elasticity of Substitution," Econometrica, Econometric Society, vol. 80(6), pages 2765-2784, November.
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    1. repec:eee:reecon:v:71:y:2017:i:4:p:645-649 is not listed on IDEAS
    2. repec:eee:reecon:v:71:y:2017:i:4:p:729-739 is not listed on IDEAS
    3. d’Aspremont, Claude & Dos Santos Ferreira, Rodolphe, 2017. "The Dixit–Stiglitz economy with a ‘small group’ of firms: A simple and robust equilibrium markup formula," Research in Economics, Elsevier, vol. 71(4), pages 729-739.

    More about this item

    Keywords

    monopolistic competition; oligopolistic competition; general equilibrium; intersectoral substitution;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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