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  

Pierre M. Picard

Centre de Recherche en Économie Appliquée (CREA); Universite du Luxembourg

Eric Toulemonde

IZA Institute of Labor Economics; Facultés Universitaires Notre-Dame de la Paix (FUNDP) - Faculty of Economics, Management and Social Sciences

Date Written: March 2005

Abstract

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.

Suggested Citation

Picard, Pierre M. and Toulemonde, Eric, On Monopolistic Competition and Optimal Product Diversity: A Comment on Cost Structure and Workers' Rents (March 2005). CORE Discussion Paper No. 2005/16. Available at SSRN: https://ssrn.com/abstract=880398 or http://dx.doi.org/10.2139/ssrn.880398

Pierre M. Picard (Contact Author)

Centre de Recherche en Économie Appliquée (CREA) ( email )

Campus Limpertsberg
162A, avenue de la Faïencerie
Luxembourg, 1511
Luxembourg

Universite du Luxembourg

L-1511 Luxembourg
Luxembourg

Eric Toulemonde

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Facultés Universitaires Notre-Dame de la Paix (FUNDP) - Faculty of Economics, Management and Social Sciences ( email )

Rempart de la Vierge 8
B-5000 Namur
Belgium
+32 81 725 313 (Phone)
+32 81 724 840 (Fax)

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