Product Diversity and Welfare: Some Further Results
The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics
The main purpose of this paper is to examine recent work in monopolistic competition theory concerned with the influence of fixed costs (no convexities) on Chamberlin’s (1951) welfare ‘ideal’ which distinguishes a trade-off between allocative efficiency and product diversity. Inefficiency is shown to be no longer just a matter of non-marginal-cost pricing. The actual number of commodities and the product mix are important considerations for welfare analysis of product differentiation.
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Persistent link: https://EconPapers.repec.org/RePEc:wrk:warwec:138
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