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Trade, Firm Size, and Product Variety under Monopolistic Competition

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  • F. J. Anderson

Abstract

Monopolistic competition is used to examine rationalization behavior in response to market integration. A particular second-order condition on demand functions for differentiated products must be satisfied to generate an increase in firm size with an associated decline in equilibrium price when market size increases. For identical products, the firm size increase is guaranteed. The number of firms increases less than it does in proportion to market size for identical products, but may increase more than in proportion to market size for differentiated products. The latter results implies that market integration need not lead to exit of firms.

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  • F. J. Anderson, 1991. "Trade, Firm Size, and Product Variety under Monopolistic Competition," Canadian Journal of Economics, Canadian Economics Association, vol. 24(1), pages 12-20, February.
    • Handle: RePEc:cje:issued:v:24:y:1991:i:1:p:12-20
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    Cited by:

    1. Duan Lianjie, 2019. "A Two-factor Model of Intra-industry Trade: A Demonstration of Robustness of Krugman’s (1980) Model," Journal of Systems Science and Information, De Gruyter, vol. 7(5), pages 422-436, October.
    2. Kokovin Sergey & Zhelobodko Evgeniy, 2009. "Generalized Comparative Statics under Monopolistic Competition:Anti-competitive Paradox, Immiserizing Growth, Catastrophes," EERC Working Paper Series 09/09e, EERC Research Network, Russia and CIS.

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