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Monopolistic competition and non-neighboring-goods (*)

Mario Pascoa

Economic Theory, 1996, vol. 9, issue 1, 129-142

Abstract: This paper studies price games played by a continuum of differentiated producers who face demands generated by additively separable preferences exhibiting a non-neighboring goods property. The examples of exact equilibria show that an asymmetric Chamberlian outcome is compatible with nonzero profits for nonmarginal firms and also with constant average costs, contrary to long sustained views. The paper tries also to short out the structure behind this class of examples and identify as general features the presence of nonperfectly elastic demands facing individual firms and the existence of an approximate Chamberlinian equilibrium.

JEL-codes: C70 D23 (search for similar items in EconPapers)
Date: 1996
Note: Received: July 15, 1994; revised version December 4, 1995
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