Input-Output Linkages and Optimal Product Diversity

Sergey Kichko

HSE Working papers from National Research University Higher School of Economics

Abstract: We derive a simple necessary and sufficient condition on preferences for the market outcome to be socially optimal under monopolistic competition with input-output (IO) linkages. Preferences that satisfy this condition are typically non-CES and display pro-competitive effects, although they converge to the CES when IO linkages become negligibly weak. We show that the equilibrium with pro-competitive effects may deliver both excessive and insufficient entry of firms in equilibrium

Keywords: input-output linkages; optimum product diversity; monopolistic competition; pro-competitive effects (search for similar items in EconPapers)
JEL-codes: D4 D6 L1 (search for similar items in EconPapers)
Pages: 14 pages
Date: 2017
New Economics Papers: this item is included in nep-mic
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Published in WP BRP Series: Economics / EC, June 2017, pages 1-14

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Journal Article: Input–output linkages and optimal product diversity (2017)
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