Monopolistic competition in general equilibrium: Beyond the CES

Evgeny Zhelobodko, Sergey Kokovin, Mathieu Parenti () and Jacques Thisse

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Abstract: We propose a general model of monopolistic competition and derive a complete characterization of the market equilibrium using the concept of Relative Love for Variety. When the RLV increases with individual consumption, the market generates pro-competitive effects. When it decreases, the market mimics anti-competitive behavior. The CES is a borderline case. We extend our setting to heterogeneous firms and show that the cutoff cost decreases (increases) when the RLV increases (decreases). Last, we study how combining vertical, horizontal and cost heterogeneity affects our results.

Keywords: monopolistic competition; additive preferences; love for variety; heterogeneous firms; concurrence monopolistique; préférences additives; préférence pour la variété; firmes hétérogènes (search for similar items in EconPapers)
Date: 2011-02
New Economics Papers: this item is included in nep-cba and nep-com
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Related works:
Working Paper: Monopolistic competition in general equilibrium: beyond the CES (2011)
Working Paper: Monopolistic competition in general equilibrium: Beyond the CES (2011)
Working Paper: Monopolistic Competition in General Equilibrium: Beyond the CES (2011)
Working Paper: Monopolistic Competition in General Equilibrium: Beyond the CES (2011)
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