On monopolistic competition and optimal product diversity: workers ’ rents also matter

Pierre Picard and Eric Toulemonde

DEM Discussion Paper Series from Department of Economics at the University of Luxembourg

Abstract: In the Dixit-Stiglitz model of monopolistic competition, entry of firms is socially too small. Other authors have shown that excess entry is also a possibility with other preferences for diversity. We show that workers' rents also contribute to explain excess entry through a general equilibrium mechanism. Larger wages indeed raises the aggregate earnings and firms sales and profits, which entices too many firms to enter. We discuss the possibility of over-provision of varieties by comparing the equilibrium to unconstrained and constrained social optima and to other regulatory framework where wages are not controlled.

Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://wwwfr.uni.lu/content/download/16901/214247/ ... %20also%20matter.pdf (application/pdf)

Related works:
Journal Article: On monopolistic competition and optimal product diversity: workers' rents also matter (2009)
Journal Article: On monopolistic competition and optimal product diversity: workers' rents also matter (2009)
Working Paper: On monopolistic competition and optimal product diversity: workers' rents also matter (2009)
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:luc:wpaper:08-09

Access Statistics for this paper

More papers in DEM Discussion Paper Series from Department of Economics at the University of Luxembourg Contact information at EDIRC.
Bibliographic data for series maintained by Marina Legrand ().