Monopolistic Competition

  • Luis C. Corchón


General features of Monopolistically Competitive markets. The model of a representative consumer: Are average costs decreasing in the optimum? (Proposition 4.1). The effect on social welfare of an increase in the output or the number of firms in equilibrium (Propositions 4.2–3). A model with a representative consumer and the Large Group assumption: The relationship between optimal and equilibrium qualities (Proposition 4.4) and between optimal and equilibrium output (Proposition 4.5). The horizontal differentiation model: The model of the circular city (Salop). Existence of an equilibrium (Proposition 4.6). The convergence of Monopolistic Competition to Perfect Competition in large economies (Proposition 4.7). Appendix: Existence of optimal and equilibrium allocations (Propositions 4.8–9).


Profit Maximization Equilibrium Output Representative Consumer Welfare Maximization Active Firm 
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Additional References

  1. SAMUELSON, P.A. (1958). “The Monopolistic Competition Revolution”, in E. Mansfield (ed.) Selected Readings in Microeconomics, Norton.Google Scholar
  2. DOS SANTOS FERREIRA, R. and THISSE, J.F. (1992). “Horizontal and Vertical Differentiation”. Mimeo. Centre de Recherche en Sciences Economiques et de Gestion. Strasbourg.Google Scholar
  3. CORCHÓN, L. (1991). “Monopolistic Competition: Equilibrium and Optimality”. International Journal of Industrial Organization 9, pp. 441–452.CrossRefGoogle Scholar
  4. EATON, B.C. and LIPSEY, R.G. (1989). “Product Differentiation” chapter 12 in R. Schmalensee and R. Willig (eds.) Handbook of Industrial Organization. North Holland. Amsterdam and New York.Google Scholar

Copyright information

© Springer-Verlag Berlin Heidelberg 2001

Authors and Affiliations

  • Luis C. Corchón
    • 1
  1. 1.Department of EconomicsUniversity of Madrid “Carlos III”Getafe, MadridSpain

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