Monopolistic Competition and Efficiency under Firm Heterogeneity and Nonadditive Preferences

• 成果类型: Article
• 署名作者: Bagwell, Kyle; Lee, Seung Hoon
• 署名单位: Stanford University; National Bureau of Economic Research; Yonsei University
• 刊物名称: AMERICAN ECONOMIC JOURNAL-MICROECONOMICS
• ISSN/ISSBN: 1945-7669
• DOI: 10.1257/mic.20210099
• 发表日期: 2023
• 页码: 208-267
• 关键词: product selection; trade models; market-size; prices; entry; COSTS

摘要

We consider the single-sector version of the Melitz-Ottaviano model of monopolistic competition with heterogeneous firms. We characterize the first-best and market allocations. We find that the market provides the first-best level of entry but too little selection; hence, the market provides too many varieties and too little aggregate quantity, and allocates too little (much) production to low (high) cost realizations. Allowing for a broad family of quantity allocation functions, we establish sufficient conditions for the global optimality of the first-best solution. Several important extensions are also examined.