Details

Autor(en) / Beteiligte

• Yang, Xiaokai
• Heijdra, Ben J

Titel

Monopolistic competition and optimum product diversity: Comment/Reply

Ist Teil von

• The American economic review, 1993-03, Vol.83 (1), p.295

Ort / Verlag

Nashville: American Economic Association

Erscheinungsjahr

1993

Quelle

Business Source Ultimate

Beschreibungen/Notizen

• The model of Dixit and Stiglitz (1977) has received more and more attention from economists in the past decade and can now be regarded as the central model of monopolistic competition. It is shown that an alternative solution exists for the DS model, one that makes full use of the structure of that model. The analysis traces through the implications of this new solution method on the qualitative conclusions derived from the DS model itself and various models derived from it. The implications of the new solution method in some cases reverse the conclusions derived on the basis of the DS solution method. The DS solution method is valid if the number of commodities (the degree of diversification) is large. The validity of the assumption of monopolistic competition depends on a large number of goods. The number of goods, however, is endogenously determined within the model and depends on specifications of technology and endowments.