Josheski, Dushko and Koteski, Cane and Lazarov, Darko (2011): Monopolistic competition: Critical evaluation the theory of monopolistic competition with specific reference to the seminal 1977 paper by Dixit and Stiglitz.
Download (731kB) | Preview
This paper revisits the D-S (Dixit-Stiglitz) model. It’s a simple general monopolistic model with n monopolistic goods, and a numeraire good Labour ( w=1); aggregation for all goods in the economy. We have considered in our paper constant elasticity of substitution case(CES).On the supply side, the assumption is that the labour is perfectly mobile factor of production across the sectors, so as a result in our model there is single wage rate which we denote as in the other sectors than monopolistic there is constant returns to scale and we can specify the production function: The Dixit-Stiglitz model of monopolistic competition works only when n is large; from the functions of the productions best when one applies linear production function. Under increasing returns to scale monopolistic competition will lead to a greater degree of product differentiation than it is socially optimal.
|Item Type:||MPRA Paper|
|Original Title:||Monopolistic competition: Critical evaluation the theory of monopolistic competition with specific reference to the seminal 1977 paper by Dixit and Stiglitz|
|Keywords:||Monopolistic competition, CES, Dixit-Stiglitz model, product differentiation|
|Subjects:||B - History of Economic Thought, Methodology, and Heterodox Approaches > B2 - History of Economic Thought since 1925 > B21 - Microeconomics
D - Microeconomics > D4 - Market Structure, Pricing, and Design > D43 - Oligopoly and Other Forms of Market Imperfection
|Depositing User:||DJ Josheski|
|Date Deposited:||29. Sep 2011 23:29|
|Last Modified:||13. Feb 2013 02:10|
1. Breakman Steven and Heiydra J. Ben (2004)The Monopolistic competition Revolution in Retrospect Cambridge:Cambridge university press.Chapter 6
2. Chiang C.Alpha (1984),Fundamental Methods of Mathematical Economics McGraw-Hill International editions 3. Dixit ,A.K. (Dec.1989), Optimization in economic theory ,Oxford university press
4. Dixit, Avinash K.; Stiglitz E. Joseph (Jun., 1977), Monopolistic Competition and Optimum Product DiversityThe American Economic Review, Vol. 67, No. 3.pp 297-308.
5. d'Aspremont; Claude Rodolphe Dos Santos Ferreira; Louis-André Gérard-Varet(Jun., 1996), On the Dixit-Stiglitz Model of Monopolistic Competition pp: 623-629
6. Koeniger Winfried, Licandro IZA Omar European University Institute and FEDEA January 2004 ;Substitutability and Competition in the Dixit-Stiglitz Model∗pp1-6
7. Lancaster Kevin (Sep., 1975), Socially Optimal Product Differentiation The American Economic Review, Vol. 65, No. 4.pp 567-585
8. Yang Xiaokai; Heijdra J. Ben ,(Mar., 1993), Monopolistic Competition and Optimum Product Diversity: CommentThe American Economic Review, Vol. 83, No. 1. pp. 295-301