A Theory of Monopolistic Competition with Horizontally Heterogeneous Consumers

Arbeitspapier

Our novel approach to modeling monopolistic competition with heterogeneous firms and consumers involves spatial product differentiation. Space can be interpreted either as a geographical space or as a space of characteristics of a differentiated good. In addition to price setting, each firm also chooses its optimal location in this space. We formulate conditions for positive sorting: more productive firms serve larger market segments and face tougher competition; and for the existence and uniqueness of the equilibrium. To quantify the role of the sorting mechanism, we calibrate the model using cross-sectional haircut market data and perform counterfactual analysis. We find that inequality in the distribution of the gains among consumers caused by positive market shocks can be substantial: the gains of consumers from more populated locations are 3-4 times higher.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: CESifo Working Paper ; No. 10263

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Trade: General ; Production, Pricing, and Market Structure; Size Distribution of Firms ; Oligopoly and Other Imperfect Markets
• Thema: firm heterogeneity ; geographical space ; product space ; positive sorting ; product niches

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Kokovin, Sergey ; Ozhegova, Alina ; Sharapudinov, Shamil ; Tarasov, Alexander ; Ushchev, Philip
• Ereignis: Veröffentlichung
• (wer): Center for Economic Studies and ifo Institute (CESifo)
• (wo): Munich
• (wann): 2023

Weitere Informationen

• Handle: http://hdl.handle.net/10419/271907
• Letzte Aktualisierung: 10.03.2025, 11:43 MEZ