scholarly journals Monopolistic Competition in a Large Economy

2012 ◽  
Vol 4 (1) ◽  
pp. 123-129
Author(s):  
Tapan Biswas

Fort a small economy, the equilibrium under monopolistic competition may not be Pareto optimal. The paper deals with the condition for the existence and Pareto optimality of equilibrium under monopolistic competition in a large economy with differentiated products.

1973 ◽  
Vol 95 (4) ◽  
pp. 356-361 ◽  
Author(s):  
G. Leitmann ◽  
W. Schmitendorf

We consider the optimal control problem with vector-valued criterion (including cooperative games) and seek Pareto-optimal (noninferior) solutions. Scalarization results, together with modified sufficiency theorems from optimal control theory, are used to deduce sufficient conditions for Pareto-optimality. The utilization of these conditions is illustrated by various examples.


2019 ◽  
pp. 152-175

The paper builds a two-sector monopolistic competition model featuring multi-product firms and heterogeneous consumers endowed with a Cobb–Douglas utility nesting a generalized CES function. In contrast to the standard CES, the generalized CES function includes both the love of variety and the love for product quality, which makes it possible to distinguish consumers differing in their product quality perception. The industrial sector encompasses firms producing differentiated products of varied quality, targeting a certain type of consumer. In such a case, firms set the price and quality for a particular product so as to maximize their profits, while consumers find the optimum price-quality combination, which may be different for groups of consumers having different preferences. The model allows one to derive the demand functions of heterogeneous consumers for goods of different quality and makes it possible to analyze different strategies of firms in their choice of the optimal price-quality ratio for their products. It also allows the formulation of conditions for screening in the case of incomplete information about the type of consumers. The main difference between the equations for screening in the model of monopolistic competition and the standard screening models in theory of contracts lies in the absence of individual rationality restrictions in the monopolistically competitive setting, where only the incentive compatibility is taken into account for both groups of consumers. As a result, in the absence of additional restrictions on the part of the regulatory authorities, the screening procedure in the monopolistic competition setting leads to a decrease in welfare for less affluent consumers.


Author(s):  
Matthew I. Campbell

The concept of Pareto optimality is the default method for pruning a large set of candidate solutions in a multi-objective problem to a manageable, balanced, and rational set of solutions. While the Pareto optimality approach is simple and sound, it may select too many or too few solutions for the decision-maker’s needs or the needs of optimization process (e.g. the number of survivors selected in a population-based optimization). This inability to achieve a target number of solutions to keep has caused a number of researchers to devise methods to either remove some of the non-dominated solutions via Pareto filtering or to retain some dominated solutions via Pareto relaxation. Both filtering and relaxation methods tend to introduce many new adjustment parameters that a decision-maker (DM) must specify. In the presented Skewboid method, only a single parameter is defined for both relaxing the Pareto optimality condition (values between −1 and 0) and filtering more solutions from the Pareto optimal set (values between 0 and 1). This parameter can be correlated with a desired number of solutions so that this number of solutions is input instead of an unintuitive adjustment parameter. A mathematically sound derivation of the Skewboid method is presented followed by illustrative examples of its use. The paper concludes with a discussion of the method in comparison to similar methods in the literature.


2008 ◽  
Vol 53 (02) ◽  
pp. 317-333 ◽  
Author(s):  
WATARU JOHDO

This paper analyzes the effects of a changing production subsidy in a model with money-in-the-utility function for households, monopolistic competition amongst an endogenously-determined number of firms, and nominal wage sluggishness that can prevent the equilibrium from attaining full employment. Its conclusion is that in a steady state with less than full employment (that is, under stagnation), a larger production subsidy will promote entry and stimulate effective demand provided that the elasticity of substitution among the differentiated products is sufficiently high. This paper is motivated by recent Japanese experiences.


2004 ◽  
Vol 94 (4) ◽  
pp. 1108-1129 ◽  
Author(s):  
Gordon H Hanson ◽  
Chong Xiang

We develop a monopolistic-competition model of trade with many industries to examine how home-market effects vary with industry characteristics. Industries with high transport costs and more differentiated products tend to be more concentrated in large countries than industries with low transport costs and less differentiated products. We test this prediction using a difference-in-difference gravity specification that controls for import tariffs, importing-country remoteness, home bias in demand, and the tendency for large countries to export more of all goods. We find strong evidence of home-market effects whose intensity varies across industries in a manner consistent with theory.


2016 ◽  
Vol 33 (3) ◽  
Author(s):  
Ignacy Kaliszewski ◽  
Tomasz Kiczkowiak ◽  
Janusz Miroforidis

Purpose We present an approach to multiple criteria mechanical design problems, for cases where problem complexity precludes derivation of the whole Pareto front. For such problems we propose to limit search, and hence also derivation, of the Pareto front exclusively to regions of the direct designer’s interest, thus saving on computing efforts and gaining on tractable problem sizes. Design/methodology/approach To achieve the purpose, we frame the decision making process (design) into a combination of three specific concepts, namely decision maker's preference capture, local Pareto front search and approximate multiobjective optimization with assessments of the Pareto optimality gap. We illustrate the approach with two small design problems, namely Pareto optimal round tube beam and Pareto optimal pneumatic high speed machine drive selection. We solve these problems in a setting which can be regarded as representative for problem solving in real environment. Findings On the decision making side, the proposed approach has turned out to be a versatile tool for selecting designs from the Pareto suboptimal ones, where each such a Pareto suboptimal design has an explicit assessment of the Pareto optimality gap. On the technical (optimization) side, it has been demonstrated that the approach seamlessly works with evolutionary computations, structured to the specific needs of the approach. Research limitations/implications It has been shown that the navigation over the Pareto front can be achieved with limited effort, both on the cognitive and the computing side. Moreover, navigation over the Pareto front can be focused from the very beginning of the design selection process on the regions of the Pareto front which are of the direct designer’s interest. This eliminates the need to derive (or only approximate) the whole Pareto front, a tangible asset as the derivation of that set is the main factor precluding scalability of design selection problems to higher dimensions (to higher problem sizes). Practical implications Because of the general formulation of the Pareto optimal design selection problem considered in the paper, the absence of any assumptions on its form and easiness of implementation of the underlying procedure of the proposed approach, the paper offers a clear option to approaches based on classical optimization computations. Originality/value The approach offers derivation of Pareto suboptimal designs with assessments of the Pareto optimality gap, whereas currently available multiobjective evolutionary optimization algorithms which derive Pareto suboptimal designs as well, offer no such assessments. Thus, the approach provides a firm ground to valuate designs resulting from approximate multiobjective optimization computations.


2021 ◽  
Vol 0 (0) ◽  
Author(s):  
Anthony Creane

Abstract In their seminal paper, Grossman, G. M., and C. Shapiro. 1984. “Informative Advertising with Differentiated Products.” The Review of Economic Studies 51: 63–81 assume that it is not profitable for a firm to deviate to the supercompetitive price of Salop, S. C. 1979. “Monopolistic Competition with outside Goods.” The Bell Journal of Economics 10: 141–56. In this note, it is shown that this assumption is violated if, roughly, each firm reaches less than half of all consumers unless it is a duopoly. This implies that most of the simulations in Grossman, G. M., and C. Shapiro. 1984. “Informative Advertising with Differentiated Products.” The Review of Economic Studies 51: 63–81 are not actually equilibria. More importantly, this implies that for their equilibrium to exist nearly all consumers must receive at least one ad. For example, with just four firms in the market, at least 96% of the consumers must receive at least one ad, and this percentage increases with the number of firms in the market.


1981 ◽  
Vol 12 (1) ◽  
pp. 57-71 ◽  
Author(s):  
Bernard Baton ◽  
Jean Lemaire

In a series of celebrated papers, K. Borch characterized the set of the Pareto-optimal risk exchange treaties in a reinsurance market. However, the Pareto-optimality and the individual rationality conditions, considered by Borch, do not preclude the possibility that a coalition of companies might be better off by seceding from the whole group. In this paper, we introduce this collective rationality condition and characterize the core of this game without transferable utilities in the important special case of exponential utilities. The mathematical conditions we obtain can be interpreted in terms of insurance premiums, calculated by means of the zero-utility premium calculation principle. We then show that the core is always non-void and conclude by an example.


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