Article (Scientific journals)
On monopolistic competition and optimal product diversity: workers' rents also matter
Picard, Pierre M.; Toulemonde, Eric
2009In Canadian Journal of Economics, 42 (4), p. 1347-1360
Peer reviewed
 

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Abstract :
[en] In the Dixit-Stiglitz model of monopolistic competition, entry of rms is socially too small. Other authors have shown that excess entry is also a possibility with other preferences for diversity. We show that workers rents also contribute to explain excess entry through a general equilibrium mechanism. Larger wages indeed raises the aggregate earnings and rms sales and pro ts, which entices too many rms to enter. We discuss the possibility of over-provision of varieties by comparing the equilibrium to unconstrained and constrained social optima and to other regulatory framework where wages are not controlled.
Disciplines :
Microeconomics
Author, co-author :
Picard, Pierre M. ;  University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA)
Toulemonde, Eric
Language :
English
Title :
On monopolistic competition and optimal product diversity: workers' rents also matter
Publication date :
November 2009
Journal title :
Canadian Journal of Economics
ISSN :
0008-4085
Publisher :
Blackwell Publishing, Toronto, Canada
Volume :
42
Issue :
4
Pages :
1347-1360
Peer reviewed :
Peer reviewed
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since 10 December 2013

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