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Welfare, Competition, Specialization and Growth

  • Daria Onori

    ()

    (IRES - Université Catholique de Louvain)

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.

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Paper provided by HAL in its series Working Papers with number halshs-00580722.

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Date of creation: 29 Mar 2011
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Handle: RePEc:hal:wpaper:halshs-00580722
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