Monopolistic competition under uncertainty

Alexander Shapoval and Goncharenko Vasiliy

EERC Working Paper Series from EERC Research Network, Russia and CIS

Abstract: Inspired by advances in general equilibrium modelling with monopolistic competition were-consider the problem of the choice of firms under uncertainty, explore it in the framework of general equilibrium modelling, and develop a theory of monopolistic competition under demand uncertainty. We distinguish between two cases of uncertainty. In the first case the uncertainty disappears by the moment of trade and the output but not the prices are chosen under uncertainty. Then the uncertainty is established not to affect the equilibrium. The trade under uncertainty, considered in the second case, causes market imperfetions. The supply is bigger (smaller) than the expected demand when the goods are good (bad) substitutes. In contrast to previous study, we show that uncertainty affects basically the prices and demand, but not the output.

JEL-codes: D11 D41 D81 L11 (search for similar items in EconPapers)
Date: 2014-02-26
New Economics Papers: this item is included in nep-com and nep-ind
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Citations: View citations in EconPapers (1)

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