The different consumption functions of products and product differentiation

Waka Cheung and Yew-Kwang Ng ()

No 318, Econometric Society 2004 Australasian Meetings from Econometric Society

Abstract: This paper develops a monopolistic competition model to study the characteristics of products, such as quality improvement and product diversity (function-specialization and individualization), and the division of labor in production. Different from the ordinary economic model, our utility function includes these characteristics and reveals economies of function-specialization and individualization. Moreover, our production function includes these characteristics and reveals economies of vertical specialization and function-specialization. Through comparative static analysis, we find the optimal characteristics and their correlations with population, transaction costs, management efficiency and production technology, etc.

Keywords: product diversity; quality; theory of the firm; division of labor; monopolistic competition (search for similar items in EconPapers)
JEL-codes: D11 L11 D43 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com and nep-mic
Date: 2004-08-11

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