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Monopolistic Competition in General Equilibrium: Beyond the CES

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

No DP2011-16, Discussion Paper Series from Research Institute for Economics & Business Administration, Kobe University

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 (search for similar items in EconPapers)
JEL-codes: D43 F12 L13 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2011-03
New Economics Papers: this item is included in nep-cba and nep-ind
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https://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/DP2011-16.pdf First version, 2011 (application/pdf)

Related works:
Working Paper: Monopolistic competition in general equilibrium: beyond the CES (2011) Downloads
Working Paper: Monopolistic competition in general equilibrium: Beyond the CES (2011) Downloads
Working Paper: Monopolistic competition in general equilibrium: Beyond the CES (2011) Downloads
Working Paper: Monopolistic Competition in General Equilibrium: Beyond the CES (2011) Downloads
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