Toward a theory of monopolistic competition

• 成果类型: Article
• 署名作者: Parenti, Mathieu; Ushchev, Philip; Thisse, Jacques-Francois
• 署名单位: Universite Libre de Bruxelles; Centre for Economic Policy Research - UK; HSE University (National Research University Higher School of Economics); Universite Catholique Louvain
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2016.10.005
• 发表日期: 2017
• 页码: 86-115
• 关键词: monopolistic competition; general equilibrium; additive preferences; Homothetic preferences

摘要

We propose a general model of monopolistic competition, which encompasses existing models while being flexible enough to take into account new demand and competition features. Even though preferences need not be additive and/or homothetic, the market outcome is still driven by the sole variable elasticity of substitution. We impose elementary conditions on this function to guarantee empirically relevant properties of a free-entry equilibrium. Comparative statics with respect to market size and productivity shocks are characterized through necessary and sufficient conditions. Furthermore, we show that the attention to the CES based on its normative implications was misguided: we propose a new class of preferences, which express consumers' uncertainty about their love for variety, that yield variable markups and may sustain the optimum. Last, we show how our approach can cope with heterogeneous firms once it is recognized that the elasticity of substitution is firm-specific. (C) 2016 Elsevier Inc. All rights reserved.