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The different consumption functions of products and product differentiation


  • Waka Cheung
  • Yew-Kwang Ng


This paper develops a monopolistic competition model to study the characteristics of products, such as quality improvement and product diversity (function-specialization and individualization), and the division of labor in production. Different from the ordinary economic model, our utility function includes these characteristics and reveals economies of function-specialization and individualization. Moreover, our production function includes these characteristics and reveals economies of vertical specialization and function-specialization. Through comparative static analysis, we find the optimal characteristics and their correlations with population, transaction costs, management efficiency and production technology, etc.

Suggested Citation

  • Waka Cheung & Yew-Kwang Ng, 2004. "The different consumption functions of products and product differentiation," Econometric Society 2004 Australasian Meetings 318, Econometric Society.
  • Handle: RePEc:ecm:ausm04:318

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    Cited by:

    1. Gupta, Abhay, 2006. "Technological Progress on Consumption side: Consolidation and Prevalence of Complements," MPRA Paper 8998, University Library of Munich, Germany.

    More about this item


    product diversity; quality; theory of the firm; division of labor; monopolistic competition;

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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