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Monopolistic competition with generalized additively separable preferences

Author

Listed:
  • Paolo Bertoletti
  • Federico Etro

Abstract

We study monopolistic competition equilibria with free entry and social planner solutions under symmetric generalized additively separable preferences, which encompass known cases such as additive, homothetic, translog and other preferences. This setting can jointly produce competition and selection effects of entry, incomplete pass-through of cost changes and pricing to market. We discuss the inefficiencies of the market equilibrium under Gorman-Pollak preferences and show its optimality under implicit constant elasticity of substitution preferences. We propose a new specification of generalized translated power preferences, and discuss applications to trade and macroeconomics.

Suggested Citation

  • Paolo Bertoletti & Federico Etro, 2021. "Monopolistic competition with generalized additively separable preferences," Oxford Economic Papers, Oxford University Press, vol. 73(2), pages 927-952.
    • Handle: RePEc:oup:oxecpp:v:73:y:2021:i:2:p:927-952.
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    File URL: http://hdl.handle.net/10.1093/oep/gpaa016
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    Citations

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    Cited by:

    1. Burak Dindaroglu, 2023. "Product design in monopolistic competition," International Journal of Economic Theory, The International Society for Economic Theory, vol. 19(3), pages 471-488, September.
    2. Etro, Federico, 2021. "Device-funded vs ad-funded platforms," International Journal of Industrial Organization, Elsevier, vol. 75(C).
    3. Cavallari, Lilia, 2022. "The international real business cycle when demand matters," Journal of Macroeconomics, Elsevier, vol. 73(C).
    4. Etro, Federico, 2023. "Technologies for endogenous growth," Journal of Mathematical Economics, Elsevier, vol. 105(C).
    5. Paolo Bertoletti & Federico Etro, 2022. "Monopolistic competition, as you like it," Economic Inquiry, Western Economic Association International, vol. 60(1), pages 293-319, January.
    6. Federico Etro, 2023. "Hybrid Marketplaces with Free Entry of Sellers," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 62(2), pages 119-148, March.
    7. Luca Macedoni & Ariel Weinberger, 2021. "Quality Misallocation, Trade, and Regulations," CESifo Working Paper Series 9041, CESifo.
    8. Gilad Sorek, 2024. "Monopolistic Competition and Quality Innovation with Variable Demand Elasticity," Auburn Economics Working Paper Series auwp2024-05, Department of Economics, Auburn University.
    9. Paolo Bertoletti & Federico Etro, 2024. "Insufficient Entry in Monopolistic Competition," Working Papers 543, University of Milano-Bicocca, Department of Economics.
    10. Fally, Thibault, 2022. "Generalized separability and integrability: Consumer demand with a price aggregator," Journal of Economic Theory, Elsevier, vol. 203(C).
    11. Federico Etro, 2021. "Product selection in online marketplaces," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 30(3), pages 614-637, August.

    More about this item

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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