From local to global competition

Abstract

We introduce a framework that has known models of oligopolistic competition with differentiated products (the circle, the logit, and the CES) as limit cases. This integrative approach incorporates both localized and global competition, as well as price-sensitive individual demands. It is used to explain the impact of major changes over the last two centuries: reductions in transport costs, increased taste for variety, population growth, and use of technologies with greater returns to scale. We work out the properties of an extended Chamberlinian model with applications both in Industrial Organization and Economic Geography.