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Title: Product design in monopolistic competition
Authors: Dindaroğlu, Burak
Keywords: Additively separable preferences
Monopolistic competition
Product design
Issue Date: 2022
Publisher: Wiley
Abstract: We consider a model of monopolistic competition where producers can manipulate an elasticity parameter at an early stage. We interpret this as a choice of product specialization. Lower marginal costs of production lead to more generic products in all equilibria, which lead to fewer varieties under free-entry. Entry of a new firm increases overall specialization and increases prices, that is, the environment exhibits price-increasing competition. The loss of consumer surplus due to higher prices and lower consumption is compensated by the value of additional variety, hence entry also increases consumer surplus. Therefore, price-increasing competition need not be anticompetitive under endogenous specialization.
Description: Article; Early Access
ISSN: 1742-7355
Appears in Collections:Rectorate / Rektörlük
Scopus İndeksli Yayınlar Koleksiyonu / Scopus Indexed Publications Collection
WoS İndeksli Yayınlar Koleksiyonu / WoS Indexed Publications Collection

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