Abstract
Pettengill tests whether there is an excessive number of firms in a monopolistically competitive equilibrium by a device of considerable expository merit. He removes one firm, and redistributes the resources thus released equally over the remaining firms in the sector, to see if welfare can be improved. To do this correctly, we write n, for the equilibrium number of firms and xe for the output of each. With fixed cost a and constant average variable cost c, removing one firm releases (a + Cxe) of resources, and this enables the output of each of the remaining ( I) firms to be increased (a + c Xe )/(1fl 1)}. The quantity xo of the numeraire good is unaffected by this, and the utility function (equation (31) of our paper) is
Keywords
NuméraireMonopolistic competitionEconomicsFree entryMicroeconomicsFixed costCompetitive equilibriumVariable costVariable (mathematics)Competition (biology)WelfareConstant (computer programming)Function (biology)Product (mathematics)EconometricsMonopolyMathematicsEcologyComputer scienceMarket economyBiology
Related Publications
The Market Mechanism as an Incentive Scheme
It is often argued that competition in the product market reduces managerial slack. We formalize this idea. Suppose that there is a common component to firms' costs, i.e., as on...
Strategic Factor Markets: Expectations, Luck, and Business Strategy
Much of the current thinking about competitive strategy focuses on ways that firms can create imperfectly competitive product markets in order to obtain greater than normal econ...
Prospering in Dynamically-Competitive Environments: Organizational Capability as Knowledge Integration
Unstable market conditions caused by innovation and increasing intensity and diversity of competition have resulted in organizational capabilities rather than served markets bec...
Uncertain Imitability: An Analysis of Interfirm Differences in Efficiency under Competition
Causal ambiguity inherent in the creation of productive processes is modeled by attaching an irreducible ex ante uncertainty to the level of firm efficiency that is achieved by ...
Competitive strategy : techniques for analyzing industries and competitors
Michael Porter presents a comprehensive structural framework and analytical techniques to help a firm to analyze its industry and evolution, understand its competitors and its o...
Publication Info
- Year
- 1975
- Type
- article
- Volume
- 67
- Issue
- 3
- Pages
- 302-304
- Citations
- 7571
- Access
- Closed
External Links
Social Impact
Altmetric
PlumX Metrics
Social media, news, blog, policy document mentions
Citation Metrics
7571
OpenAlex
Cite This
Avinash Dixit,
Joseph E. Stiglitz
(1975).
MONOPOLISTIC COMPETITION AND OPTIMUM PRODUCT DIVERSITY.
AgEcon Search (University of Minnesota, USA)
, 67
(3)
, 302-304.
https://doi.org/10.22004/ag.econ.268957
Identifiers
- DOI
- 10.22004/ag.econ.268957