MONOPOLISTIC COMPETITION AND PRODUCT DIVERSITY: REVIEW AND EXTENSION

Abstract The modeling of monopolistic competition has contributed to rapid developments in numerous fields of economics, notably macroeconomics, international trade, industrial organization, economic growth and economic geography. This paper provides a systematic review and some extensions of various path‐breaking models of monopolistic competition and their subsequent developments, including the works of Spence, Dixit and Stiglitz that are based on the ‘love‐of‐variety’ approach, the works of Lancaster that are based on the ‘love‐of‐characteristic’ approach, and the large‐group monopolistic competition models of Hart, among others. The paper also examines the properties of some utility functions frequently used in the literature on models of monopolistic competition. Perhaps owing to the complexity of these models, the literature lacks a broad and systematic coverage of this essential subject. The paper aims to help fill the gap.     

价格垄断行为违法所得计算模型探讨

根据反垄断经济学的基本原理,通过分析价格垄断行为违法所得的基本特征,从而构建出价格垄断行为违法所得的计算模型,为反价格垄断执法实践提供可操作性的工具。     

自然垄断是否导致市场进入壁垒的理论探析

近些年来,世界上许多国家因为自然垄断行业产生的一些弊端,而对其都进行了一系列的改革,那么自然垄断行业本身特有的特性是否导致了其垄断的必然性,是否会导致产业内的市场进入壁垒,基于此,对这些问题进行了较详尽的分析与探讨。     

Government spending on public infrastructure,prices, production and international trade

This paper examines the impact of a change in government spending on public infrastructure when monopolistic competition prevails in one sector of the economy. The analysis is based on a variation of the Spence-Dixit-Stiglitz model where the presence of internal economies in the production of a differentiated intermediate good leads to specialization based external economies in the production of the final good. It is shown that changes in government spending on public infrastructure can influence relative prices, production, the degree of specialization, and pattern of international trade.     

MARKETS, INSTITUTIONS AND MILLENNIUM DEVELOPMENT GOALS

The Millennium Development Goals (MDGs) may have noble objectives but there are concerns that the associated transfer of resources from wealthy to poor countries could be counter-productive in terms of long-term economic performance. Reforming the institutions of governance and removing barriers that hinder the efficient functioning of markets are the most effective ways for poor countries to achieve MDGs. Poor countries can also improve living standards by relying on market forces rather than monopolistic public agencies for the delivery of services.     

Asymptotic stability of a general equilibrium under perfect and monopolistic competition

This study examines the asymptotic stability of a general equilibrium for an economy under perfect and monopolistic competition in which delays in a production process arise. Crucially, we find that the sufficient conditions for the stability of the equilibrium in each model differ markedly. For the stability of the equilibrium under perfect (monopolistic) competition, it is favorable that the slope of every demand curve is gradual (steep).     

Non-smooth dynamics and multiple equilibria in a Cournot–Ramsey model with endogenous markups

We consider a Ramsey model with a continuum of Cournotian industries where free entry generates an endogenous markup. The model produces two different regimes, monopolistic and Cournotian monopolistic competition, resulting in non-smooth dynamics. We analyze the global dynamics of the model, demonstrating it may exhibit heteroclinic orbits connecting multiple equilibria. Small transitory changes in parameters can lead to large permanent effects and there can be a poverty trap separating a low-capital and high-markup equilibrium from a high-capital low-markup equilibrium. We apply results from the mathematics of non-smooth dynamic systems, which provide a more general framework for understanding regime switching.     

Spatial competition with free entry, Chamberlinian tangencies, and social efficiency

Free entry in Löschian spatial competition leads to a tangency between each firm's negatively sloped average revenue and the downsloping portion of average costs—as in Chamberlin's monopolistic competition. It is generally concluded that this equilibrium involves too many inefficiently small firms. However, this conclusion is incorrect. The difference between price and firm marginal production costs in spatial equilibrium is just sufficient to cover the additional marginal cost of output resulting from availability of multiple locations. This Chamberlinian tangency does not imply inefficiency, because it does not include all the social costs and benefits resulting from spatial competition.     

Knowledge Spillovers,Competition and Innovation Success

We study the relationship between a patent-based measure of knowledge spillovers that calculates technological proximity based on technologically relevant firms and innovation success. We find – for a representative sample of Swiss firms – that knowledge spillovers have a positive and significant association with the commercial success of innovative products. The paper shows the importance of market conditions for the relationship of spillovers with innovation performance: It is only positive and significant in markets with a medium number of competitors in the main product market, but not in monopolistic or polypolistic market structures.     

Interpreting Voluntary Exchange: Markets,Speech Acts And Communicative Action

This paper uses speech act theory to present a libertarian reinterpretation of the Habermasian concept of communicative action. Voluntary exchange in competitive markets is interpreted as a speech act and a form of communicative action that respects autonomy and obstructs power. Where exchange occurs in monopolistic markets, it is defective in being a form of (a) strategic action aimed directly at rival suppliers rather than buyers and (b) economic coercion. Voluntary exchange is not an isolated act but the outcome of a complex bargaining process, which may lead to negotiated exit, without the possibility of which economic relations are coercive.     

New monetarism with endogenous product variety and monopolistic competition

I examine the role played by endogenous variety and monopolistic competition in the long-run transmission of monetary policy. I integrate free entry, product variety and monopolistic competition into a New Monetarist framework, considering preferences that give rise to either constant or variable markups. I find that inflation generally reduces variety. Under CES preferences, firms are inefficiently small, with the inefficiency increasing with product differentiation and the extent of search frictions. The Friedman rule is the best policy under CES preferences. In contrast, with variable elasticity of demand, inflation can increase firm size, reduce markups, and raise welfare, even though output is lower. Under CES preferences, the welfare cost of inflation is high; moreover, this cost increases monotonically with the markup and is higher with endogenous variety than with a fixed product space.     

On the estimation of returns to scale, technical progress and monopolistic markups

A number of theoretical results on estimating returns to scale, technical progress and monopolistic markups are derived when there are multiple outputs and inputs. The choice of value added versus gross output and problems that arise in aggregation across sectors of an economy are also considered. Using US data on manufacturing, evidence is found of increasing returns to scale across all levels of aggregation. Technical progress is typically found to be insignificant implying that economic growth has been driven by increasing returns to scale rather than technical progress. Such findings have important implications for the macroeconomic modeling of economic fluctuations.     

No Monopoly for Trust-Busters

Why should we expect the Monopolies and Mergers Commission to be more efficient than any other government department? Ian Senior of the Economists Advisory Group finds the MMC is itself guilty of monopolistic tendencies, with predictable accompanying inefficiencies.     

NATURAL ADVANTAGE EFFECT, LOCATION AND TRADE PATTERNS IN INCREASING RETURNS TO SCALE INDUSTRIES

In a two sectors, two regions economy I show that the higher the increasing returns to scale of an industry, the more easily it will concentrate in response to natural advantage (giving rise to what I call Natural Advantage Effect). To this end, one sector is assumed to be perfectly competitive and the other is monopolistically competitive, with a region's firms producing at a lower marginal cost than the others in the monopolistic sector (or equivalently producing varieties more intensely demanded by consumers). If capital is mobile between regions in the long run, I analytically characterize the process of industrial location of the imperfectly competitive sector in the region with the natural advantage.     

Location, innovation and trade: The role of localization and nation-based externalities

This paper models locales that produce goods for trade outside their boundaries. We use a model that assumes monopolistic competition in both service and traded goods sectors; and, influenced by Porter (The Competitive Advantage of Nations, The Free Press, New York, 1990), we study the impact of both a localization externality and a nation-based externality. The localization externality is related to innovation that occurs because of agglomeration in the locale. The nation-based externality reflects the idea that some nations promote competitive industries more successfully than do others. We identify two types of comparative statics effects related to two distinct results of innovation.     

Matching, search and intermediation with two-sided heterogeneity

This paper analyzes the role played by intermediation in a decentralized market, where trade is carried out through bilateral bargaining, and where the bargaining outcome depends on the process of search for suitable trading partners. To this purpose, a monopolistic intermediary is embedded in a dynamic model of random-matching and two-sided search with heterogeneous agents. It is shown that intermediation might speed up the matching process and might induce separation of the agents’ types, thus enhancing sorting efficiency with respect to a pure search market, where sorting externalities cause multiplicity of equilibria to arise and determine inefficient matching outcomes. Nonetheless, intermediation might also introduce frictions that do not exist in a decentralized market operating in isolation, and this impairs efficiency.      

Niche firms,mass markets,and income across countries: Accounting for the impact of entry costs

I develop a model of monopolistic competition in which I distinguish between niche markets and mass markets, in the spirit of Holmes and Stevens, 2014. Firms choose between entering a small niche market with high markups or a large mass market with low markups. Entry costs and other distortions have a much greater impact on output in the niche market as the gains to specialization are high, relative to the mass market where varieties are highly substitutable. Calibrated to match data from U.S. manufacturing, the model generates an elasticity of total factor productivity with respect to entry costs almost twice that in a model that abstracts from heterogeneous markets. I use data on entry costs across countries to show entry costs alone can account for 23 percent of the cross-country variation in income per worker.     

Chamberlinian Spatial Computable General Equilibrium Modelling: A Theoretical Framework

In this paper, a multi-regional multi-sectoral computable general equilibrium model is developed by bringing together different strands of theoretical reasoning. These are as follows: input–output analysis, gravity modelling, the theory of intra-industry trade and the theory of general equilibrium under conditions of monopolistic competition. The innovation in this approach is the assumption that, within each sector, a large number of different brands of output are produced. Households like diversity of consumption and diversity of inputs is a productive factor for firms. The number of brands produced in each sector and region is endogenous. A certain amount of fixed costs per brand imposes an upper bound on the number of available brands. Factor markets are perfectly competitive, while monopolistic competition prevails on goods markets. The equilibrium solution of the model closely resembles models which have been applied on an ad hoc basis in regional science before, but it is well founded in modern economic theory now. In particular, trade flows obey a gravity law in equilibrium.     

The effects of barriers to entry on monopolistic intermediary online services: The case of a digital library

Online intermediaries (OIs) are becoming increasingly important market institutions. They have low marginal costs and display the indirect network effect, which suggests that the benefit of an intermediary to sellers (buyers) increases with the number of buyers (sellers) connected to that intermediary. OIs may be further characterized by the levels of barriers to entry they face and the direct network effect, i.e., the benefit to a seller decreases with the number of sellers connected to the intermediary. This paper models a digital library where creators sell their works to information users. It is found that a monopolistic digital library with the above characteristics over-serves its creators, which leads them to over-invest in creation, and over-supply information products to consumers. Furthermore, the over-investment is more severe when the barriers to entry in the digital library sector are lower. A counter-intuitive policy implication is that removing barriers to entry in monopolistic markets with the above characteristics does not improve, but rather worsens, social welfare.     

实贷实付制度下高速公路融资对策

管理层实施信贷资金＂实贷实付＂制度的本意是减少信贷资金闲置、限制垄断信贷资金行为,将信贷资金规模导向小微企业。实施三年来,该政策对高速公路建设产生了一定影响,文中将分析实贷实付政策对高速公路建设资金筹措的影响,并提出应对措施供大家参考。