On Monopolistic Competition and Optimal Product Diversity: A Comment on Cost Structure and Workers' Rents
Pierre M. Picard
Centre de Recherche en Économie Appliquée (CREA); Universite du Luxembourg
Institute for the Study of Labor (IZA); Facultés Universitaires Notre-Dame de la Paix (FUNDP) - Faculty of Economics, Management and Social Sciences
CORE Discussion Paper No. 2005/16
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.
Number of Pages in PDF File: 10
Date posted: February 8, 2006