Monopolistic Competition Equilibrium Research Articles

On equilibrium in monopolistic competition with endogenous labor

We consider a model of monopolistic competition with several heterogeneous sectors and endogenous labor supply. For low (high) values of the labor supply elasticity, we show that there is always a unique equilibrium. For medium values of the labor supply elasticity, there are either zero or two equilibria.

On Equilibrium in Monopolistic Competition with Endogenous Labor

We consider a model of monopolistic competition with several heterogeneous sectors and endogenous labor supply. For low (high) values of the labor supply elasticity, we show that there is always a unique equilibrium. For medium values of the labor supply elasticity, the set of equilibria (if non-empty) can comprise of several equilibria, with the number of equilibria bounded by the number of sectors.

On the Nature of Equilibrium in Monopolistic Competition

This paper shows that product differentiation is compatible with perfect competition under free entry and exit and small firm size relative to size of market. Thus, monopolistic competition is a form of perfect competition. Although no product sold under monopolistic competition has a perfect substitute, each product has many close, albeit imperfect, substitutes, which have a cumulative effect on own-price elasticity of demand. With infinitely elastic demand, excess capacity and sub-optimal firm size disappear from monopolistic competition in equilibrium. The number of basic industrial structures is reduced to three—monopoly or single seller, oligopoly or competition among the few, and perfect competition or competition among the many. Perfect competition can be divided into perfect competition with homogeneous products and perfect competition with differentiated products. Advertising can pay off under the latter, since products have separate identities and price depends on quality, even though firms are price takers for any given quality. Under oligopoly, firms will behave like Chamberlin’s monopolistic competitors when certain conditions are met, but there is no guarantee that these conditions ever will prevail. Finally, I ask how small a firm’s share of industry output value must be if it is to be a de facto price taker.

Markups and Misallocation with Trade and Heterogeneous Firms

With non-homothetic preferences, a monopolistic competition equilibrium is inefficient in the way inputs are allocated towards production. This paper quantifies a gains from trade component that is present only when reallocation is properly measured in a setting with heterogeneous firms that charge variable markups. Due to variable markups, reallocations initiated by aggregate shocks impact allocative efficiency depending on the adjustment of the market power distribution. My measurement compares real income growth with the hypothetical case of no misallocation in quantities. Using firm and industry-level data from Chile during a period with large terms of trade gains, I find that cost reductions are associated with losses in allocative efficiency because firms pass-through measured productivity gains into markups. From industry-year variation, there is also evidence that industries that import a larger share of their inputs become more misallocated as a result of exchange rate appreciations compared to open sectors whose output competition becomes fiercer.

Markups and Misallocation with Trade and Heterogeneous Firms

With general preferences, a monopolistic competition equilibrium can be inefficient in the way inputs are allocated towards production. This paper formalizes the welfare impact of reallocation of quantities across firms (within an industry) by comparing real income growth with the hypothetical case of no misallocation in quantities ‐ as is the case when consumer preferences are CES and producers choose a constant markup. In contrast, my monopolistic competition model is consistent with variable markups such that reallocations initiated by aggregate shocks that affect firms’ demand or cost curves can impact allocative efficiency. Open economy shocks, even by raising production overall, can have opposing consequences for the misallocation distortion depending on the adjustment of the market power distribution. Using firmlevel data from Chile for 1995-2007, a period with large terms of trade gains, I find that average productivity gains are not necessarily associated with gains in allocative efficiency because firms pass-through productivity gains into markups. From industryyear variation, there is also evidence that industries that import a larger share of their inputs have higher markup dispersions and become more misallocated as a result of appreciations compared to “open” sectors that compete globally in the sale of their output.

Un « marché des villes » en économie géographique avec des coûts urbains endogènes

Dans un équilibre d’économie géographique entre deux villes, on introduit des coûts urbains : migrations alternantes, rente foncière et un impôt local qui permet de développer les transports urbains. Ces coûts urbains sont la seule force de dispersion du modèle, où il n’y a pas d’agriculteurs. On étudie par simulation les équilibres de court et de long terme entre les deux villes. L’absence d’agriculteurs inverse les conclusions de Krugman: la population est concentrée dans une seule ville lorsque les coûts de transport des biens industriels sont élevés et elle est dispersée lorsqu’ils sont faibles. On compare trois instruments fiscaux permettant de financer le développement des transports urbains: taxe foncière, impôt uniforme par ménage et péage. Pour maximiser le bien-être, l’impôt foncier est le meilleur et le péage le moins bon. Le modèle permet d’analyser le jeu des forces d’économie géographique (arbitrage rendements croissants — coûts de transport) et des forces d’économie urbaine (arbitrage coûts fonciers — coût des migrations alternantes). Elles jouent tantôt dans le même sens (pression fiscale faible ou forte) tantôt en sens opposé (niveau intermédiaire), avec des effets sur l’utilité des deux villes (court terme) ou sur leur population (long terme).

The Long Run of Macroeconometric Models

This paper which constitutes a substantially abridged version of Deleau et Al. (1988) studies the existence and properties of Steady State Growth Paths (SSGP) associated with a given macroeconometric model. The analysis of these SSGP yields a powerful insight into the specification and theoretical structure of the model. In particular, it shows that the underlying long run structure of typical “neokeynesian” macroeconometric models is not Walrasian as is often asserted, but that it should rather be interpreted as a monopolistic competition equilibrium.

Price discrimination and equilibrium in monopolistic competition

Modern theories of monopolistic competition have borrowed extensively from techniques developed in location theory and the theory of spatial pricing: the monopolistically competitive firm is assumed to choose a ‘location’ and price for its product. A subject that has been of increasing concern in this corpus of theory is that there exists no free-entry price-location equilibrium. In this paper we demonstrate that free-entry price-location equilibrium exists provided only that producers are allowed to price discriminate among customers in a reasonable manner. Equilibrium is modelled as a two-stage game using the Selten concept of subgame perfect Nash equilibrium. It is shown that the equilibrium discriminatory price system is one initially identified by Hoover. In addition, we show that equilibrium is not unique. The precise nature of equilibrium in a particular market will be dependent upon the history of that market.

A Note on Equilibrium in Monopolistic Competition

Previous articleNext article No AccessCommunicationsA Note on Equilibrium in Monopolistic CompetitionYoram PelesYoram Peles Search for more articles by this author PDFPDF PLUS Add to favoritesDownload CitationTrack CitationsPermissionsReprints Share onFacebookTwitterLinkedInRedditEmail SectionsMoreDetailsFiguresReferencesCited by Journal of Political Economy Volume 82, Number 3May - Jun., 1974 Article DOIhttps://doi.org/10.1086/260220 Views: 4Total views on this site Citations: 2Citations are reported from Crossref Copyright 1974 The University of ChicagoPDF download Crossref reports the following articles citing this article:R. Rothschild The Theory of Monopolistic Competition: E.H. Chamberlin's Influence on Industrial Organisation Theory over Sixty Years, Journal of Economic Studies 14, no.11 (Jan 1987): 34–54.https://doi.org/10.1108/eb002641G. C. Archibald, B. C. Eaton, R. G. Lipsey Address Models of Value Theory, (Jan 1986): 3–52.https://doi.org/10.1007/978-1-349-18058-5_1

A Note on the Nature of Equilibrium in Monopolistic Competition

Previous articleNext article No AccessCommunicationsA Note on the Nature of Equilibrium in Monopolistic CompetitionWilliam C. PerkinsWilliam C. Perkins Search for more articles by this author PDFPDF PLUS Add to favoritesDownload CitationTrack CitationsPermissionsReprints Share onFacebookTwitterLinkedInRedditEmail SectionsMoreDetailsFiguresReferencesCited by Journal of Political Economy Volume 80, Number 2Mar. - Apr., 1972 Article DOIhttps://doi.org/10.1086/259891 Views: 2Total views on this site Citations: 1Citations are reported from Crossref Copyright 1972 The University of ChicagoPDF download Crossref reports the following articles citing this article:R. Rothschild The Theory of Monopolistic Competition: E.H. Chamberlin's Influence on Industrial Organisation Theory over Sixty Years, Journal of Economic Studies 14, no.11 (Jan 1987): 34–54.https://doi.org/10.1108/eb002641

The Nature of Equilibrium in Monopolistic Competition

Previous articleNext article No AccessThe Nature of Equilibrium in Monopolistic CompetitionHarold DemsetzHarold Demsetz Search for more articles by this author PDFPDF PLUS Add to favoritesDownload CitationTrack CitationsPermissionsReprints Share onFacebookTwitterLinkedInRedditEmail SectionsMoreDetailsFiguresReferencesCited by Journal of Political Economy Volume 67, Number 1Feb., 1959 Article DOIhttps://doi.org/10.1086/258127 Views: 19Total views on this site Citations: 24Citations are reported from Crossref Copyright 1959 The University of ChicagoPDF download Crossref reports the following articles citing this article:Dianqing Xu, Ying Liu , ( 2018): 1.https://doi.org/10.1007/978-981-13-0881-9_1Louis Makowski Imperfect Competition, (Feb 2018): 6115–6121.https://doi.org/10.1057/978-1-349-95189-5_944Craig Freedman The Chicago School of Anti-Monopolistic Competition: Stigler’s Scorched Earth Campaign Against Chamberlin, (Nov 2016): 165–342.https://doi.org/10.1057/978-1-137-58974-3_5Dieter Schneider Verdankt die Betriebswirtschaftslehre Volkswirtschaftslehrern ihre Theorie?, Schmalenbachs Zeitschrift für betriebswirtschaftliche Forschung 52, no.55 (Aug 2016): 419–439.https://doi.org/10.1007/BF03372624Tadiboyina Venkateswarlu Industrial Organization: Survey of Reading Materials in Universities in Canada and the United States, The American Economist 37, no.11 (Jul 2016): 84–90.https://doi.org/10.1177/056943459303700114John G. Greenhut, Hiroshi Ohta On Efficiency of Spatial Oligopoly, (Jan 1993): 386–402.https://doi.org/10.1007/978-1-349-22906-2_21M. L. GREENHUT, W. J. LANE A THEORY OF OLIGOPOLISTIC COMPETITION, The Manchester School 57, no.33 (Sep 1989): 248–261.https://doi.org/10.1111/j.1467-9957.1989.tb00814.xPeter W. Belenky Spatial competition with free entry, Chamberlinian tangencies, and social efficiency: A correction, Journal of Urban Economics 26, no.11 (Jul 1989): 75–83.https://doi.org/10.1016/0094-1190(89)90028-4Michael R. Darby, John R. Lott Qualitative information, reputation, and monopolistic competition, International Review of Law and Economics 9, no.11 (Jun 1989): 87–103.https://doi.org/10.1016/0144-8188(89)90008-2Thomas W. Hazlett The role of property rights in the positive theory of monopoly, Managerial and Decision Economics 8, no.33 (Sep 1987): 201–212.https://doi.org/10.1002/mde.4090080305Louis Makowski Imperfect Competition, (Nov 2016): 1–7.https://doi.org/10.1057/978-1-349-95121-5_944-1R. Rothschild The Theory of Monopolistic Competition: E.H. Chamberlin's Influence on Industrial Organisation Theory over Sixty Years, Journal of Economic Studies 14, no.11 (Jan 1987): 34–54.https://doi.org/10.1108/eb002641STEPHEN E. MARGOLIS THE EXCESS CAPACITY CONTROVERSY: A CRITIQUE OF RECENT CRITICISM, Economic Inquiry 23, no.22 (Apr 1985): 265–275.https://doi.org/10.1111/j.1465-7295.1985.tb01764.xBruce L. Benson Spatial competition with free entry, Chamberlinian tangencies, and social efficiency, Journal of Urban Economics 15, no.33 (May 1984): 270–286.https://doi.org/10.1016/0094-1190(84)90002-0 Benjamin Klein , and Keith B. Leffler The Role of Market Forces in Assuring Contractual Performance, Journal of Political Economy 89, no.44 (Oct 2015): 615–641.https://doi.org/10.1086/260996M. L. GREENHUT IMPACTS OF DISTANCE ON MICROECONOMIC THEORY, The Manchester School 46, no.11 (Mar 1978): 17–40.https://doi.org/10.1111/j.1467-9957.1978.tb00150.xMICHAEL M. MURPHY THE CONSISTENCY OF PERFECT AND MONOPOLISTIC COMPETITION, Economic Inquiry 16, no.11 (Jan 1978): 108–112.https://doi.org/10.1111/j.1465-7295.1978.tb00496.xH. OHTA ON THE EXCESS CAPACITY CONTROVERSY, Economic Inquiry 15, no.22 (Apr 1977): 153–165.https://doi.org/10.1111/j.1465-7295.1977.tb00463.x William Mark Crain , and Robert B. Ekelund, Jr. Chadwick and Demsetz on Competition and Regulation, The Journal of Law and Economics 19, no.11 (Oct 2015): 149–162.https://doi.org/10.1086/466859Joe R. Hulett, Robert B. Eke Lund, W. Mark Crain The Private Provision of Public Goods: A Note on the Demsetz Model, Public Finance Quarterly 4, no.11 (Jan 1976): 45–55.https://doi.org/10.1177/109114217600400104 Phillip Nelson Advertising as Information, Journal of Political Economy 82, no.44 (Oct 2015): 729–754.https://doi.org/10.1086/260231Roland N. McKean An Outsider Looks at Urban Economics, Urban Studies 10, no.11 (Jul 2016): 19–37.https://doi.org/10.1080/00420987320080021 Richard Schmalensee A Note on Monopolistic Competition and Excess Capacity, Journal of Political Economy 80, no.3, Part 13, Part 1 (Oct 2015): 586–591.https://doi.org/10.1086/259907 William C. Perkins A Note on the Nature of Equilibrium in Monopolistic Competition, Journal of Political Economy 80, no.22 (Oct 2015): 394–402.https://doi.org/10.1086/259891

The Stability of Competitive Equilibrium

IN AN EARLIER PAPER1 I derived conditions for the stability of equilibrium in monopolistic competition for two competitors. The extension of that analysis to cover more than two competitors is by no means obvious, and it is a matter of importance to know how the number of competitors affects the question of stability. It is therefore to the solution of the problem for n competitors that the present paper will be devoted. Although the economic problem will be limited to the question of monopolistic price competition, the methods employed can be used to test the stability of any equilibrium determined by the-solution of a system of linear equations. In Section I we shall formulate a demand function for n competitors in an imperfect market, and also their cost functions. In Section II we shall derive the conditions for the existence of equilibrium and in Section III we shall determine the conditions for its stability in the cases both of noncontinuous and continuous adjustment on the basis of a given set of expectations. In Section IV we shall consider the implications of our results for the general cases of two, three, and n competitors, while in Section V we solve the problem completely for n identical competitors. Finally in Section VI, we shall adumbrate the problems involved when the stability of the expectations themselves is brought into question.

Equilibrium in Monopolistic Competition: An Addendum

Equilibrium in Monopolistic Competition: An Addendum

Equilibrium in Monopolistic Competition

The meaning of an imperfect market, 95.--Assumptions underlying the present analysis, 96.--I. The demand functions, 96.--II. Competitor's expectation of his rivals' behavior, 98.--His estimated demand function, 100.--III. Diagrammatic demonstration of attainment of equilibrium, 100.--IV. Equilibrium conditions for the general case, 103.--Conditions affecting the relative magnitudes of p1 and p2 equilibrium: (1) differences in demand functions, 105; different methods of estimation, 106; (3) cost differences, 106.--V. Conditions under which equilibrium is stable and economically possible, 107.--Cases where the stability conditions are not fulfilled or where equilibrium is economically impossible, 114. (Из JStore)