Monopolistic Competition, As You Like It

35 Pages Posted: 11 Jul 2017

See all articles by Paolo Bertoletti

Paolo Bertoletti

Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS)

Federico Etro

Ca Foscari University of Venice

Multiple version iconThere are 2 versions of this paper

Date Written: June 2017

Abstract

We study imperfect and monopolistic competition with asymmetric preferences over a variety of goods provided by heterogeneous firms. We show how to compute equilibria through the Morishima elasticities of substitution. Simple pricing rules and closed-form solutions emerge under monopolistic competition when demands depend on common aggregators. This is the case for Generalized Additively Separable preferences (encompassing additive preferences and their Gorman-Pollak extensions), implicitly additive preferences and others. For applications to trade, with markups variable across goods of different quality, and to macroeconomics, with markups depending on aggregate variables, we propose specifications of indirectly additive, self-dual addilog and implicit CES preferences.

Keywords: Imperfect Competition, Monopolistic Competition, Asymmetric Preferences, Heterogeneous Firms

JEL Classification: D11, D43, L11

Suggested Citation

Bertoletti, Paolo and Etro, Federico, Monopolistic Competition, As You Like It (June 2017). University Ca' Foscari of Venice, Dept. of Economics Research Paper Series No. 08/WP/2017, Available at SSRN: https://ssrn.com/abstract=2998152 or http://dx.doi.org/10.2139/ssrn.2998152

Paolo Bertoletti

Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS) ( email )

Piazza dell'Ateneo Nuovo, 1
Milan, 20126
Italy

Federico Etro (Contact Author)

Ca Foscari University of Venice ( email )

Dorsoduro 3246
Venice, Veneto 30123
Italy

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