Morrow, John and Dhingra, Swati (2019) Monopolistic competition and optimum product diversity under firm heterogeneity. Journal of Political Economy, 127 (1). 196 - 232. ISSN 0022-3808
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Abstract
Empirical work has drawn attention to the high degree of productivity differences within industries and their role in resource allocation. This paper examines the allocational efficiency of such markets. Productivity differences introduce two new margins of potential inefficiency: selection of the right distribution of firms and allocation of the right quantities across firms. We show that these considerations affect welfare and policy analysis, and market power across firms leads to distortions in resource allocation. Demand-side elasticities determine how resources are misallocated and when increased competition from market expansion provides welfare gains.
| Item Type: | Article |
|---|---|
| Official URL: | http://www.journals.uchicago.edu/toc/jpe/current |
| Additional Information: | © 2014 The University of Chicago Press |
| Divisions: | Economics Centre for Economic Performance |
| Subjects: | H Social Sciences > HB Economic Theory |
| Date Deposited: | 27 Aug 2014 09:28 |
| Last Modified: | 14 Apr 2024 07:45 |
| Projects: | PTDC/EGE-ECO/122115/2010 |
| Funders: | Fundacao para a Ciencia e a Tecnologia (FCT) |
| URI: | http://eprints.lse.ac.uk/id/eprint/59226 |
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