Decoupling the CES distribution circle with quality and beyond: equilibrium distributions and the CES-Logit nexus

Simon Anderson and André de Palma (adepalmajl@gmail.com)

No 14168, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We show for CES demands with heterogeneous productivities that profit, revenue, and output distributions lie in the same closed power-family as the productivity distribution (e.g., the "Pareto circle"). The price distribution lies in the inverse power-family. Equilib- rium distribution shapes are linked by linear relations between their density elasticities. Introducing product quality decouples the CES circle, and reconciles Pareto price and Pareto sales revenue distributions. We use discrete choice underpinnings to find variable mark-ups for a more flexible demand formulation bridging CES to Logit and beyond. For logit demand, exponential (resp. normal) quality-cost distributions generate Pareto (log-normal) economic size distributions.

Keywords: Ces; Monopolistic competition; Quality; Closed power-family distributions; Pareto; Power; Generalised (log-)normal; Logit; Mark-ups; Box-cox (search for similar items in EconPapers)
JEL-codes: F12 L13 (search for similar items in EconPapers)
Date: 2019-12
New Economics Papers: this item is included in nep-dcm, nep-eff and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP14168 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: Decoupling the CES Distribution Circle with Quality and Beyond: Equilibrium Distributions and the CES-Logit Nexus (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:14168

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP14168
orders@cepr.org

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by (repec@cepr.org).