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).
KeywordsProfit Maximization Equilibrium Output Representative Consumer Welfare Maximization Active Firm
Unable to display preview. Download preview PDF.
- SAMUELSON, P.A. (1958). “The Monopolistic Competition Revolution”, in E. Mansfield (ed.) Selected Readings in Microeconomics, Norton.Google Scholar
- 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
- 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