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Monopolistic Competition, As You Like It

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  • Paolo Bertoletti
  • Federico Etro

Abstract

We study monopolistic competition with asymmetric preferences over a variety of goods provided by heterogeneous firms, and show how to compute equilibria through the Morishima measures of substitution. Further results concerning pricing and entry emerge under homotheticity and when demands depend on common aggregators, as for Generalized Additively Separable preferences (encompassing additive, Gorman-Pollak and implicit CES preferences). We discuss selection effects of changes in aggregate productivity, expenditure and market size, and present applications to trade, with markups variable across goods, and macroeconomics, with markups depending on aggregate variables.

Suggested Citation

  • Paolo Bertoletti & Federico Etro, 2018. "Monopolistic Competition, As You Like It," Working Papers - Economics wp2018_31.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
    • Handle: RePEc:frz:wpaper:wp2018_31.rdf
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    More about this item

    Keywords

    Monopolistic competition; Asymmetric preferences; Heterogeneous firms; Generalized separability; Variable markups;
    All these keywords.

    JEL classification:

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

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