Monopolistic Competition, Multiproduct Firms and Optimum Product Diversity

Gianmarco Ottaviano and Jacques Thisse

No 2151, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper tackles the issue of optimum product diversity in an imperfectly competitive market with small or large firms. First, it develops a quadratic utility model of monopolistic competition with horizontal product differentiation which avoids some of the main pitfalls of the S-D-S approach. Second, it extends the model to the case of multiproduct firms showing how product diversity is affected with respect to monopolistic competition. In particular, it is shown that monopolistic competition with single-product firms is the limiting case of oligopolistic competition with multiproduct firms when either varieties gets more and more differentiated or when the entry cost goes further and further down.

Keywords: Monopolistic Competition; Multiproduct Firms; Product Variety (search for similar items in EconPapers)
JEL-codes: D43 L13 (search for similar items in EconPapers)
Date: 1999-05
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Citations: View citations in EconPapers (47)

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Related works:
Working Paper: Monopolistic competition, multiproduct firms and optimum product diversity (1999)
Working Paper: Monopolistic Competition, Multiproduct Firms and Optimum Product Diversity (1999)
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