On Monopolistic Competition and Optimal Product Diversity: A Comment on Cost Structure and Workers' Rents
CORE Discussion Paper No. 2005/16
10 Pages Posted: 8 Feb 2006
Date Written: March 2005
In the Dixit-Stiglitz model of monopolistic competition, entry of firms is socially too small. Other authors have shown that excess entry is also a possibility with other preferences for diversity. We show that the cost structure and workers's rents can also explain excess entry.
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