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On Monopolistic Competition and Optimal Product Diversity: A Comment on Cost Structure and Workers' Rents

  • P M Picard
  • E Toulemonde

In the Dixit-Stiglitz model of monopolistic competition, entry of firms is socially too small. Other authors have shown that excess entry is also a possibility with other preferences for diversity. We show that the cost structure and workers's rents can also explain excess entry.

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File URL: http://www.socialsciences.manchester.ac.uk/medialibrary/economics/discussionpapers/EDP-0518.pdf
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Paper provided by Economics, The University of Manchester in its series The School of Economics Discussion Paper Series with number 0518.

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Date of creation: 2005
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Handle: RePEc:man:sespap:0518
Contact details of provider: Postal: Manchester M13 9PL
Phone: (0)161 275 4868
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Web page: http://www.socialsciences.manchester.ac.uk/subjects/economics/

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  1. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
  2. d'ASPREMONT, C. & DOS SANTOS FERREIRA, R. & GÉRARD-VARET, L.-A., . "On the Dixit-Stiglitz model of monopolistic competition," CORE Discussion Papers RP 1211, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Solow, Robert M., 1979. "Another possible source of wage stickiness," Journal of Macroeconomics, Elsevier, vol. 1(1), pages 79-82.
  4. Akerlof, George A & Yellen, Janet L, 1990. "The Fair Wage-Effort Hypothesis and Unemployment," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 255-83, May.
  5. Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics.
  6. Thierry Mayer & Keith Head, 2003. "The Empirics of Agglomeration and Trade," Working Papers 2003-15, CEPII research center.
  7. Hanson, G.H., 1999. "`Market Potential, Increasing Returns, and Geographic Concentration," Working Papers 439, Research Seminar in International Economics, University of Michigan.
  8. Xavier Vives, 2001. "Oligopoly Pricing: Old Ideas and New Tools," MIT Press Books, The MIT Press, edition 1, volume 1, number 026272040x, June.
  9. Benassy, Jean-Pascal, 1991. "Monopolistic competition," Handbook of Mathematical Economics, in: W. Hildenbrand & H. Sonnenschein (ed.), Handbook of Mathematical Economics, edition 1, volume 4, chapter 37, pages 1997-2045 Elsevier.
  10. P M Picard & E Toulemonde, 2005. "On Monopolistic Competition and Optimal Product Diversity: A Comment on Cost Structure and Workers' Rents," The School of Economics Discussion Paper Series 0518, Economics, The University of Manchester.
  11. OTTAVIANO, Gianmarco & THISSE, Jacques-François, 1999. "Agglomeration and trade revisited," CORE Discussion Papers 1999041, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  12. d’ASPREMONT, Cl. & DOS SANTOS FERREIRA, R. & GERARD-VARET, L.-A., 1988. "Unemployment in a Cournot oligopoly model with Ford effects," CORE Discussion Papers 1988018, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  13. Benassy, Jean-Pascal, 1996. "Taste for variety and optimum production patterns in monopolistic competition," Economics Letters, Elsevier, vol. 52(1), pages 41-47, July.
  14. Gans, Joshua S., 1997. "Fixed cost assumptions in industrialisation theories," Economics Letters, Elsevier, vol. 56(1), pages 111-119, September.
  15. Gans, J.S., 1995. "Fixed Cost Assumptions," Papers 95/47, New South Wales - School of Economics.
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