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Welfare, Competition, Specialization and Growth

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  • Daria ONORI

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) and University of Rome “La Sapienza”, Faculty of Economics)

Abstract

In this paper we consider a simple model of horizontal differentiation and derive the closed form solutions for the level of the variables in the decentralized economy and in the social planner case. This enables us to analyze consumers’ welfare as a function of the parameter representing market power. We surprisingly find that, when the total labor force is greater than a certain level, the welfare function is an inverted-N shape in the decentralized economy and monotonically decreasing in the centralized economy. This suggests that there is another effect which interacts with market power: the degree of returns to specialization.

Suggested Citation

  • Daria ONORI, 2011. "Welfare, Competition, Specialization and Growth," LIDAM Discussion Papers IRES 2011011, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    • Handle: RePEc:ctl:louvir:2011011
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    More about this item

    Keywords

    Closed form solutions; Welfare; Competition; Degree of returns to specialization;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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