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Monopolistic Competition and General Purpose Products

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  • Thomas von Ungern-Sternberg

Abstract

Most models of monopolistic competition study the question of the "optimal degree of product differentiation" by looking at the number of firms that will locate in characteristics space. This is somewhat restrictive. The development of "general purpose" products means that the needs of quite heterogenous consumers can be satisfied with the same homogenous product. The private and social incentives to produce "general purpose" products are studied in this paper within the "circular-road-model" of monopolistic competition. The degree of general purposeness of a product is approximated by its per unit distance transport costs. It is shown that there are strong forces leading the market to supply products whose transport costs are excessively low.

Suggested Citation

  • Thomas von Ungern-Sternberg, 1988. "Monopolistic Competition and General Purpose Products," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 55(2), pages 231-246.
    • Handle: RePEc:oup:restud:v:55:y:1988:i:2:p:231-246.
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    File URL: http://hdl.handle.net/10.2307/2297579
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    Citations

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    Cited by:

    1. Bart J. Bronnenberg, 2015. "The provision of convenience and variety by the market," RAND Journal of Economics, RAND Corporation, vol. 46(3), pages 480-498, September.
    2. Foros, Øystein & Kind, Hans Jarle & Nguyen-Ones, Mai, 2024. "The choice of pricing format: Firms may choose uniform pricing over personalized pricing to induce rivals to soften competition," Information Economics and Policy, Elsevier, vol. 66(C).
    3. Nuowen Bai & Toshihiro Matsumura, 2023. "Common ownership in a delivered pricing duopoly," Journal of Economics, Springer, vol. 139(3), pages 191-208, August.
    4. Dos Santos Ferreira, Rodolphe & Thisse, Jacques-Francois, 1996. "Horizontal and vertical differentiation: The Launhardt model," International Journal of Industrial Organization, Elsevier, vol. 14(4), pages 485-506, June.
    5. John S. Heywood & Zheng Wang, 2020. "Profitable collusion on costs: a spatial model," Journal of Economics, Springer, vol. 131(3), pages 267-286, December.
    6. Toshihiro Matsumura & Daisuke Shimizu, 2015. "Endogenous Flexibility In The Flexible Manufacturing System," Bulletin of Economic Research, Wiley Blackwell, vol. 67(1), pages 1-13, January.
    7. Sällström, Susanna, 2009. "Functional Differentiation," CEPR Discussion Papers 7187, C.E.P.R. Discussion Papers.
    8. Degryse, Hans & Irmen, Andreas, 2001. "Attribute dependence and the provision of quality," Regional Science and Urban Economics, Elsevier, vol. 31(5), pages 547-569, September.
    9. Aoki, Reiko & Hillas, John & Kao, Tina, 2014. "Product Customization in the Spokes Model," CEI Working Paper Series 2014-8, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
    10. Heski Bar-Isaac & Guillermo Caruana & Vicente Cuñat, 2023. "Targeted Product Design," American Economic Journal: Microeconomics, American Economic Association, vol. 15(2), pages 157-186, May.
    11. Bakó, Barna & Horváth, Diána, 2020. "Termékdifferenciálás kétoldalú piacokon [Product differentiation on bilateral markets]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(1), pages 1-13.
    12. Nakayama, Yuji & 中山, 雄司 & ナカヤマ, ユウジ, 2001. "Spatial Competition and Accumulation of Public Capital," Discussion Paper 34, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
    13. González-Maestre, Miguel & Granero, Lluís M., 2020. "Excessive vs. insufficient entry in spatial models: When product design and market size matter," Mathematical Social Sciences, Elsevier, vol. 106(C), pages 27-35.
    14. Bar-Isaac, Heski & Caruana, Guillermo & Cuñat, Vicente, 2011. "Locating inside the Salop circle: demand rotations in a micro-founded model," LSE Research Online Documents on Economics 43163, London School of Economics and Political Science, LSE Library.
    15. Nelson Sá, 2015. "Market concentration and persuasive advertising: a theoretical approach," Journal of Economics, Springer, vol. 114(2), pages 127-151, March.
    16. Ulrich Doraszelski & Michaela Draganska, 2006. "Market Segmentation Strategies Of Multiproduct Firms," Journal of Industrial Economics, Wiley Blackwell, vol. 54(1), pages 125-149, March.
    17. González-Maestre, Miguel & Granero, Lluís M., 2018. "Competition with targeted product design: Price, variety, and welfare," International Journal of Industrial Organization, Elsevier, vol. 59(C), pages 406-428.
    18. Nikolaos Georgantzís & Gerardo Sabater-Grande, 2002. "Market Transparency and Collusion: On the UK Agricultural Tractor Registration Exchange," European Journal of Law and Economics, Springer, vol. 14(2), pages 129-150, September.
    19. Youping Li & Jie Shuai, 2018. "A Welfare Analysis of Location Space Constraints with Vertically Separated Sellers," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 52(1), pages 161-177, February.
    20. Matsumura, Toshihiro & Matsushima, Noriaki, 2007. "Congestion-reducing investments and economic welfare in a Hotelling model," Economics Letters, Elsevier, vol. 96(2), pages 161-167, August.
    21. Hendel, Igal & de Figueiredo, John Neiva, 1997. "Product differentiation and endogenous disutility," International Journal of Industrial Organization, Elsevier, vol. 16(1), pages 63-79, November.
    22. Hou, Haiyang & Wu, Xiaobo & Zhou, Weihua, 2013. "The competition of investments for endogenous transportation costs in a spatial model," Economic Modelling, Elsevier, vol. 31(C), pages 574-577.
    23. Sencer Ecer, 2003. "Sequential Product Design," Netnomics, Springer, vol. 5(1), pages 33-42, May.

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