A Competitive Equilibrium With Product Differentiation

Richard L. Carson ()
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Richard L. Carson: Department of Economics, Carleton University

No 04-18, Carleton Economic Papers from Carleton University, Department of Economics

Abstract: This note gives a method of determining the long-run equilibrium output of a firm operating under imperfect competition that differs from standard methods of output determination and reveals properties of the equilibrium that standard methods conceal. This method requires a basic cost-effectiveness condition to hold, which leads to a highly elastic demand. If we strengthen that condition a bit, long-run equilibrium under free entry and exit becomes indistinguishable from a long-run equilibrium under perfect competition, even though products are differentiated and the condition given by Rosen for perfect competition with product differentiation fails to hold.

Keywords: Imperfect Competition; Substitutability; Cost Effectiveness; Firm Size; Excess Capacity. (search for similar items in EconPapers)
JEL-codes: D24 D43 D61 (search for similar items in EconPapers)
Pages: 11 pages
Date: 2004-11-29, Revised 2017-07-13
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Published: Carleton Economic Papers

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