Market Size, Technology Choice, and Market Structure
Posted: 10 Oct 2003
Abstract
We introduce technology choice into a model of monopolistic competition and analyze the structural effects of changes in market size. A larger market leads to the adoption of a large-scale technology. If a technology switch occurs, the number of firms decreases, and a rationalizing effect arises: individual and aggregate output increases; prices fall. This need not benefit consumers since a technology switch is associated with a decrease in product variety.
Suggested Citation: Suggested Citation
Elberfeld, Walter and Götz, Georg, Market Size, Technology Choice, and Market Structure. German Economic Review, Vol. 3, pp. 25-41, 2002. Available at SSRN: https://ssrn.com/abstract=308982
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