Market structure and welfare under monopolistic competition

Nelson Sa

Economics Letters, 2015, vol. 132, issue C, 69-72

Abstract: This paper analyzes the relationship between market structure and welfare by developing a model of monopolistic competition in which exogenous entry costs and endogenous differentiation costs determine market concentration and market power. A non-monotonic link is identified between these costs and welfare under a decentralized equilibrium. These results detail new reasons why simple market concentration indicators are a misleading statistic for welfare evaluations.

Keywords: Sunk costs; Monopolistic competition; Welfare (search for similar items in EconPapers)
JEL-codes: L10 L40 O30 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:132:y:2015:i:c:p:69-72

DOI: 10.1016/j.econlet.2015.04.018

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