Monopolistic competition without apology
Глава содержит понятийный аппарат теорий межрегиональной и международной торговли, классические, неоклассические и новые теории и модели межрегиональной торговли,
We propose a general model of monopolistic competition, which encompasses existing models while being flexible enough to take into account new demand and competition features. Even though preferences need not be additive and/or homothetic, the market outcome is still driven by the sole variable elasticity of substitution. We impose elementary conditions on this function to guarantee empirically relevant properties of a free-entry equilibrium. Comparative statics with respect to market size and productivity shocks are characterized through necessary and sufficient conditions. Furthermore, we show that the attention to the CES based on its normative implications was misguided: we propose a new class of preferences, which express consumers' uncertainty about their love for variety, that yield variable markups and may sustain the optimum. Last, we show how our approach can cope with heterogeneous firms once it is recognized that the elasticity of substitution is firm-specific.
Standard measures of competitive toughness fail to capture the fact that, as consumers optimize intertemporally, firms operating today compete with (yet non-existent) businesses which will be started tomorrow. We develop a two-tier CES model of dynamic monopolistic competition in which the impact of product differentiation on the market outcome depends crucially on the elasticity of intertemporal substitution (EIS). The degree of product differentiation per se fails to serve as a meaningful indicator of competitive toughness: what matters is its cross-effect with EIS. We also extend the model to the case of non-CES preferences to capture variable markups.