Toward a ‘General’ Model of Monopol istic Competition
Abstract:
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. Using the concept of Frechet differentiability, we determine a general demand system. The ba sic tool we use to study the market outcome is the elasticity of substituti on at a symmetric consumption pattern, which depends on both the per capita consumption and the total mass of varieties. We impose intuitive condition s on this function to guarantee the existence and uniqueness of a free-entr y equilibrium. Our model is able to mimic oligopolistic behavior and to rep licate partial equilibrium results within a general equilibrium framework. For example, an increase in per capita income or in population size shifts prices (outputs) downwards (up- wards). When firms face the same productivi ty shock, they adopt an incomplete pass-through policy, except when prefere nces are homothetic. Finally, we show how our approach can be generalized t o the case of a multisector economy and extended to cope with heterogeneous firms and consumers.
DTSTAMP:20260406T135447Z DTSTART:20140324T173000Z DTEND:20140324T190000Z SEQUENCE:0 TRANSP:OPAQUE END:VEVENT END:VCALENDAR