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Clustering or Co-Agglomeration? A Love-for-Variety Approach
National Research University Higher School of Economics
,
2016.
No. WP BRP 140/EC/2016.
Malykhin N. I., Ushchev P.
We develop a simple partial-equilibrium model of endogenous city structure formation. No
production externalities are at work, the only two forces shaping the spatial configurations of
the city being love for variety (on the consumer side) and seeking for a better access to the market
(on the firm side). We show that, unlike in existing models of a similar nature, our model
generates clustering rather than co-agglomeration. Namely, if there are few firms relative to
the urban population size, then firms tend to cluster at the city center, while consumers choose
to reside on the outskirts. Otherwise, the opposite holds. Although a continuum of equilibrium
city structures may emerge, we show that all spatial equilibria are segregated. In addition, the
market outcome features spatial price dispersion, even though our framework does not involve
imperfect information and search costs on the consumer side.
Osharin A., Valery Verbus, Irina Bakunina et al., Journal of Economic Structures 2020 Vol. 9 P. 1-12
The paper develops a two-country monopolistic competition model of trade featuring country-specifc consumer tastes. The accounting for heterogeneity in tastes is achieved by assuming diferent elasticities of substitution in the CES utility function for diferent country consumers. The proposed framework extends the canonical Krugman’s approach by revealing new efects regarding markups response to consumer heterogeneity ...
Added: October 10, 2020
Matsuyama K., Ushchev P., / Centre for Economic Policy Research. Series ISSN 0265-8003 "Centre for Economic Policy Research Discussion Paper Series". 2020. No. DP14991.
The Dixit-Stiglitz model of monopolistic competition with symmetric CES demand system with gross substitutes is widely used as a building block across many applied general equilibrium fields. Two of its remarkable features are the invariance of the markup rate and the optimality of the freeentry equilibrium. Of course, neither of these two features is robust. ...
Added: November 22, 2020
Kichko S., Economics Letters 2017 Vol. 158 P. 58-61
We derive a simple necessary and sufficient condition on preferences for the market outcome to be socially optimal under monopolistic competition with input-output (IO) linkages. Preferences that satisfy this condition are typically non-CES and display pro-competitive effects, although they converge to the CES when IO linkages become negligibly weak. We show that the equilibrium with ...
Added: June 17, 2017
Bykadorov I., / Economics Education and Research Consortium. Series "EERC Working Paper Series". 2010. No. 10/03E.
In Russia the chain-stores gained a considerable market power. In the paper we combine a Dixit-Stiglitz industry with a
monopolistic retailer. The questions addressed are: Does the retailer always deteriorate welfare, prices and variety of goods?
Which market structure is worse: Nash or Stackelberg behavior? What should be the public policy in this area? ...
Added: November 17, 2013
Zhelobodko E. V., Kokovin S. G., Parenti M. et al., Econometrica 2012 Vol. 80 No. 6 P. 2765-2784
We propose a model of monopolistic competition with additive preferences and variable marginal costs. Using the concept of “relative love for variety,” we provide a full characterization of the free-entry equilibrium. When the relative love for variety increases with individual consumption, the market generates pro-competitive effects. When it decreases, the market mimics anti-competitive behavior. The ...
Added: November 20, 2013
Kichko S., Sergey Kokovin, Evgeny Zhelobodko, Journal of International Economics 2014 No. 94 P. 129-142
We develop a two-factor, two-sector trade model of monopolistic competition with variable elasticity of sub- stitution. Firms' prots and sizes may increase or decrease with market integration depending on the degree of asymmetry between countries. The country in which capital is relatively abundant is a net exporter of the manu- factured good, although both rm ...
Added: June 19, 2014
Behrens K., Murata Y., Journal of International Economics 2012 No. 87 P. 1-17
We present a general equilibrium model of monopolistic competition featuring pro-competitive effects and a competitive limit, and investigate the impact of trade on welfare and efficiency. Contrary to the constant elasticity case, in which all gains from trade are due to product diversity, our model allows for a welfare decomposition between gains from product diversity ...
Added: November 23, 2013
Shapoval S., V.M. Goncharenko, / The Economics Education and Research Consortium. Series WP 14/02E "A. Enterprises and product markets". 2014. No. 14/02E.
Inspired by advances in general equilibrium modelling with monopolistic competition were-consider the problem of the choice of firms under uncertainty, explore it in the framework of general equilibrium modelling, and develop a theory of monopolistic competition under demand uncertainty. We distinguish between two cases of uncertainty. In the first case the uncertainty disappears by the ...
Added: September 28, 2016
Alexander Osharin, Advances in Economics and Business 2013 Vol. 1 No. 2 P. 145-149
The paper investigates distributional effects and market structure in a one-sector model of monopolistic competition with heterogeneous consumers. By using the CES utility function depending on consumer’s personal income the paper shows how the equilibrium prices, firm size and number of firms depend upon income distribution and intensity of competition. The proposed model extends the ...
Added: November 13, 2013
A.Shapoval, V. M. Goncharenko, Journal of Economics 2020 Vol. 130 No. 2 P. 187-218
This paper offers a new theory that describes the influence of uncertainty on economic fundamentals. This theory posits that uncertainty can improve social welfare. We argue that in an economy, where spending of the customers for the differentiated good correlates with larger substitutability of its varieties, the equilibrium output decreases and the prices increase when uncertainty appears. Alternatively, if such ...
Added: March 2, 2020
Ошарин А.М., Аудит и финансовый анализ 2013 № 6 С. 154-160
The paper develops a one-sector model of monopolistic competition with heterogeneous consumers, which preferences depend upon their personal income. The model is used for the analysis of the mark-ups dependence on the inequality of consumers’ income distribution and average wage. The paper shows that mark-ups can ambiguously depend upon income inequality at fixed average income, ...
Added: November 14, 2013
Parenti M., Sidorov A., Thisse J. et al., International Journal of Economic Theory 2017 Vol. 167 No. 1 P. 86-115
This paper compares the market equilibria in a differentiated industry under Cournot, Bertrand, and monopolistic competition. This is accomplished in a one-sector economy where consumers are endowed with separable preferences. When firms are free to enter the market, monopolistically competitive firms charge lower prices than oligopolistic firms, while the mass of varieties provided by the ...
Added: March 29, 2017
Goryunov M., Sergey Kokovin, Tabuchi T., Economic Theory 2021 Vol. 74 No. 3 P. 793-832
Our novel approach enriches the general additive monopolistic competition model with a space of product characteristics: consumers’ “ideal varieties”. This paper bridges two traditions in modelling markets with horizontal product differentiation: the Hotelling’s (Econ J 39(153):41–57, 1929) “address economy” and Chamberlinian Dixit–Stiglitz monopolistic competition. Unlike Hotelling, our partially localised competition involves intersecting zones of service among producers. ...
Added: November 18, 2021
Pospelov I. G., Stanislav A. Radionov, / Высшая школа экономики. Series EC "Economics". 2013. No. WP BRP 34/EC/2013.
We present a natural generalization of the Dixit-Stiglitz monopolistic competition model (DSM) — we assume that there is a continuum of industries, each of them described as in DSM, and each characterized with its own elasticity of substitution. Although rms in all industries share the same level of productivity and costs, exogenous technological progress leads ...
Added: October 4, 2013
Shapoval S., Гончаренко В. М., Пространственная экономика 2014 № 3 С. 12-25
The article deals with the theory of monopolistic competition under demand uncertainty. The authors consider the economy with labor immobility consisting of the high-tech sector with monopolistic competition and the standard sector with perfect competition. Preferences between sectors are specified by the Cobb – Douglas production function. It is assumed that companies make output
decisions under ...
Added: January 16, 2015
Kichko S., / Высшая школа экономики. Series WP BRP "Economics/EC". 2017.
We derive a simple necessary and sufficient condition on preferences for the market outcome to be socially optimal under monopolistic competition with input-output (IO) linkages. Preferences that satisfy this condition are typically non-CES and display pro-competitive effects, although they converge to the CES when IO linkages become negligibly weak. We show that the equilibrium with ...
Added: June 2, 2017
Osharin A., Verbus V. A., / EERC. Series "Labor markets and social policy". 2015. No. 15/03E.
The present paper extends the traditional Dixit and Stiglitz set-up by introducing consumers’ workers’ heterogeneity into a general equilibrium model of monopolistic competition. The model obtains a closed-form solution for a symmetric equilibrium and shows how the market outcome depends on the joint distribution of consumers’/workers’ taste and labor productivities. In contrast to the traditional ...
Added: March 8, 2016
Kichko S., Behrens K., Ushchev P., / CESifo Group Munich. Series "CESifo working paper". 2018. No. WP6965.
We develop a general equilibrium model of monopolistic competition with a traded and a nontraded sector. Using a broad class of homothetic preferences—that generate variable markups, display a simple behavior of their elasticity of substitution, and nest the ces as a limiting case— we show that trade liberalization: (i) reduces domestic markups and increases imported ...
Added: April 26, 2018
Kichko S., Kokovin S. G., Zhelobodko E. V., / Austrian Institute of Economic Research, Vienna Institute for International Economic Studies, Computing Centre for Economics and Social Sciences. Series FIW "FIW Working Paper". 2013. No. 124.
We develop a two-factor, two-sector trade model of monopolistic competition with variable elasticity of substitution. Firm profit and firm size may increase or decrease with market integration depending on the degree of asymmetry between countries. The country in which capital is relatively abundant is a net exporter of the manufactured good, while both firms' size ...
Added: November 19, 2013
Radionov S., Pospelov I. G., Mathematical Models and Computer Simulations 2014 Vol. 6 No. 5 P. 445-455
Based on the well-known model of monopolistic competition by Melitz with a finite number of firms, we built a number of dynamic models, designed to clarify the dynamic behavior of the original construction. Two variants of the formal Melitz dynamic model are presented, with the quasi-steady state found in one of them. Also, the models ...
Added: September 22, 2014
Kichko S., Spatial Economic Analysis 2018 Vol. 13 No. 4 P. 387-399
We develop an economic geography framework with positive trade costs in both manufacturing and traditional sectors, mobile skilled workers, and unequal shares of unskilled labour in regions. We show that partial agglomeration always features the home market effect (HME) regardless of whether regions trade only the manufacturing good or both. Moreover, spatial factor mobility is ...
Added: July 3, 2018
Zhelobodko E. V., Sidorov A., Thisse J., Журнал Новой экономической ассоциации 2013 № 19 С. 10-26
The paper studies a market of horizontally differentiated good under increasing return to scale and exogenous number of firms. Three concepts of equilibria are compared: Cournot, Bertrand and monopolistic competition. Under fairly general assumptions on consumer’s preferences, it is shown that Lerner index is the highest in Cournot case, monopolistic competition provides the lowest one ...
Added: November 14, 2013
Ivanova V., Ushchev P., The Scandinavian Journal of Economics 2019 Vol. 121 No. 3 P. 1244-1269
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 ...
Added: January 9, 2018
Bykadorov I., Kokovin S. G., Вестник НГУЭУ 2014 № 1 С. 326-337
In 2000s, Russian large retailers captured a large share of the market and obtained a significant market power. This change in the market organization may enhance or deteriorate social welfare. Public interest in this issue stimulated adoption by the Russian Parliament (State Duma) of the law against the concentration of trade in the hands of ...
Added: October 18, 2014