Monopolistic Competition Between Differentiated Products with Demand for More Than One Variety

2006 ◽  
Author(s):  
Andrei Hagiu
Keyword(s):  
Monopolistic Competition ◽  
Differentiated Products

scholarly journals Quality Matters: Monopolistic Competition with Heterogeneous Consumers

2019 ◽  
pp. 152-175
Keyword(s):  
Product Quality ◽  
Monopolistic Competition ◽  
Incentive Compatibility ◽  
Industrial Sector ◽  
Differentiated Products ◽  
Optimal Price ◽  
Demand Functions ◽  
Optimum Price ◽  
Heterogeneous Consumers ◽  
Love Of Variety

The paper builds a two-sector monopolistic competition model featuring multi-product firms and heterogeneous consumers endowed with a Cobb–Douglas utility nesting a generalized CES function. In contrast to the standard CES, the generalized CES function includes both the love of variety and the love for product quality, which makes it possible to distinguish consumers differing in their product quality perception. The industrial sector encompasses firms producing differentiated products of varied quality, targeting a certain type of consumer. In such a case, firms set the price and quality for a particular product so as to maximize their profits, while consumers find the optimum price-quality combination, which may be different for groups of consumers having different preferences. The model allows one to derive the demand functions of heterogeneous consumers for goods of different quality and makes it possible to analyze different strategies of firms in their choice of the optimal price-quality ratio for their products. It also allows the formulation of conditions for screening in the case of incomplete information about the type of consumers. The main difference between the equations for screening in the model of monopolistic competition and the standard screening models in theory of contracts lies in the absence of individual rationality restrictions in the monopolistically competitive setting, where only the incentive compatibility is taken into account for both groups of consumers. As a result, in the absence of additional restrictions on the part of the regulatory authorities, the screening procedure in the monopolistic competition setting leads to a decrease in welfare for less affluent consumers.

PRODUCTION SUBSIDY AS A MACROECONOMIC POLICY IN A STAGNATION ECONOMY

2008 ◽  
Vol 53 (02) ◽  
pp. 317-333 ◽  
Author(s):  
WATARU JOHDO
Keyword(s):  
Steady State ◽  
Utility Function ◽  
Monopolistic Competition ◽  
Full Employment ◽  
Macroeconomic Policy ◽  
Elasticity Of Substitution ◽  
Nominal Wage ◽  
Differentiated Products ◽  
Effective Demand ◽  
Number Of Firms

This paper analyzes the effects of a changing production subsidy in a model with money-in-the-utility function for households, monopolistic competition amongst an endogenously-determined number of firms, and nominal wage sluggishness that can prevent the equilibrium from attaining full employment. Its conclusion is that in a steady state with less than full employment (that is, under stagnation), a larger production subsidy will promote entry and stimulate effective demand provided that the elasticity of substitution among the differentiated products is sufficiently high. This paper is motivated by recent Japanese experiences.

scholarly journals The Home-Market Effect and Bilateral Trade Patterns

2004 ◽  
Vol 94 (4) ◽  
pp. 1108-1129 ◽  
Author(s):  
Gordon H Hanson ◽  
Chong Xiang
Keyword(s):  
Monopolistic Competition ◽  
Bilateral Trade ◽  
Home Bias ◽  
Differentiated Products ◽  
Home Market ◽  
Transport Costs ◽  
Trade Patterns ◽  
Market Effect ◽  
Market Effects ◽  
Home Market Effects

We develop a monopolistic-competition model of trade with many industries to examine how home-market effects vary with industry characteristics. Industries with high transport costs and more differentiated products tend to be more concentrated in large countries than industries with low transport costs and less differentiated products. We test this prediction using a difference-in-difference gravity specification that controls for import tariffs, importing-country remoteness, home bias in demand, and the tendency for large countries to export more of all goods. We find strong evidence of home-market effects whose intensity varies across industries in a manner consistent with theory.

A Note on the Existence of the Competitive Equilibrium in Grossman and Shapiro (1984)

2021 ◽  
Vol 0 (0) ◽  
Author(s):  
Anthony Creane
Keyword(s):  
Monopolistic Competition ◽  
Competitive Equilibrium ◽  
Differentiated Products ◽  
Informative Advertising ◽  
Seminal Paper ◽  
Economic Studies ◽  
Number Of Firms

Abstract In their seminal paper, Grossman, G. M., and C. Shapiro. 1984. “Informative Advertising with Differentiated Products.” The Review of Economic Studies 51: 63–81 assume that it is not profitable for a firm to deviate to the supercompetitive price of Salop, S. C. 1979. “Monopolistic Competition with outside Goods.” The Bell Journal of Economics 10: 141–56. In this note, it is shown that this assumption is violated if, roughly, each firm reaches less than half of all consumers unless it is a duopoly. This implies that most of the simulations in Grossman, G. M., and C. Shapiro. 1984. “Informative Advertising with Differentiated Products.” The Review of Economic Studies 51: 63–81 are not actually equilibria. More importantly, this implies that for their equilibrium to exist nearly all consumers must receive at least one ad. For example, with just four firms in the market, at least 96% of the consumers must receive at least one ad, and this percentage increases with the number of firms in the market.

scholarly journals Monopolistic Competition in a Large Economy

2012 ◽  
Vol 4 (1) ◽  
pp. 123-129
Author(s):  
Tapan Biswas
Keyword(s):  
Pareto Optimality ◽  
Monopolistic Competition ◽  
Differentiated Products ◽  
Pareto Optimal ◽  
Large Economy ◽  
Small Economy

Fort a small economy, the equilibrium under monopolistic competition may not be Pareto optimal. The paper deals with the condition for the existence and Pareto optimality of equilibrium under monopolistic competition in a large economy with differentiated products.

The Role of Non-Coordinated Effects in the Assessment of Minority Shareholdings

2016 ◽  
Vol 14 (3) ◽  
Author(s):  
Frank Maier-Rigaud ◽  
Ulrich Schwalbe ◽  
Felix Forster
Keyword(s):  
Differentiated Products ◽  
Effective Competition ◽  
Oligopolistic Markets ◽  
Minority Shareholdings ◽  
Coordinated Effects

AbstractThis article focusses on the non-coordinated effects of minority shareholdings in oligopolistic markets. It is demonstrated that minority shareholdings even when they fall below the usual thresholds can lead to a significant impediment of effective competition (SIEC) on a purely non-coordinated basis. This is particularly likely in a market with differentiated products, when a firm partially acquires shareholdings in its closest competitor and when the next best alternative products are only weak substitutes.

The Organization and Development of Library Marketing Service

2010 ◽  
pp. 30-36
Author(s):  
Yulia V. Meshalkina
Keyword(s):  
Social Communication ◽  
Differentiated Products ◽  
Main Factors ◽  
Marketing Service ◽  
Library Marketing ◽  
Monitoring Information ◽  
Modern Russian

The article deals with the problem of marketing use in the practice of modern Russian libraries. The main factors responsible for the relevance of putting marketing instruments into library practice are defined. The model of a centralized marketing service of Moscow libraries, which provides monitoring information, social communication and leisure needs of the Muscovites, the development of differentiated products and services of library activities, advertising and promoting them to the user is represented in the article.

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