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Toward a theory of monopolistic competition

Author

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  • Parenti, M.

    (Université catholique de Louvain, CORE, Belgium)

  • Ushchev, P.

    (NRU-Higher School of Economics)

  • Thisse, J.-F.

    (Université catholique de Louvain, CORE, Belgium)

Abstract

We propose a general model of monopolistic competition with unspecified preferences. Our analysis applies to the case of symmetric/asymmetric preferences and costs. Our basic tool is the elasticity of substitution function, which is shown to depend on the actions taken by firms. We impose intuitive conditions on this function to guarantee the existence of a free-entry equilibrium. Comparative statics with respect to population size, GDP per capita and productivity shocks (the pass-through rate) is conducted by means of necessary and sufficient conditions in the case of symmetric firms.

Suggested Citation

  • Parenti, M. & Ushchev, P. & Thisse, J.-F., 2015. "Toward a theory of monopolistic competition," LIDAM Discussion Papers CORE 2015012, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:2015012
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    More about this item

    Keywords

    monopolistic competition; general equilibrium; additive preferences; homothetic preferences;
    All these keywords.

    JEL classification:

    • 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
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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