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Input-Output Linkages and Optimal Product Diversity

Author

Listed:
  • Sergey Kichko

    (National Research University Higher School of Economics)

Abstract

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 pro-competitive effects may deliver both excessive and insufficient entry of firms in equilibrium

Suggested Citation

  • Sergey Kichko, 2017. "Input-Output Linkages and Optimal Product Diversity," HSE Working papers WP BRP 164/EC/2017, National Research University Higher School of Economics.
    • Handle: RePEc:hig:wpaper:164/ec/2017
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    References listed on IDEAS

    as
    1. Michael Spence, 1976. "Product Selection, Fixed Costs, and Monopolistic Competition," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 43(2), pages 217-235.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    input-output linkages; optimum product diversity; monopolistic competition; pro-competitive effects;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • D6 - Microeconomics - - Welfare Economics
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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