|Tarasov, Alexander (April 2010): Consumer Preferences in Monopolistic Competition Models. Discussion Papers in Economics 2010-25|
This paper develops a novel approach to modeling references in monopolistic competition models with a continuum of goods. In contrast to the commonly used CES preferences, which do not capture the e¤ects of consumer income and the intensity of competition on equilibrium prices, the present preferences can capture both effects. I show that under an unrestrictive regularity assumption, the equilibrium prices decrease with the total mass of available goods (which represents the intensity of competition in the model) and increase with consumer income. The former implies that the entry of �rms in the market or opening a country to international trade has a pro-competitive effect that decreases equilibrium prices.
|Item Type:||Paper (Discussion Paper)|
|Keywords:||fi�rm prices; intensity of competition; consumer income|
Economics > Discussion Papers in Economics
|Subjects:||300 Social sciences > 300 Social sciences, sociology and anthropology|
300 Social sciences > 330 Economics
|Deposited On:||30. Apr 2010 21:38|
|Last Modified:||27. Nov 2013 20:52|
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