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EnglishAbstract. We introduce non-homothetic preferences in the Dixit–Stiglitz model of monopolistic competition, and enquire about the effects of a change in income dispersion on the firms' optimal decisions and market equilibrium. Income dispersion, modeled as a mean preserving spread, is shown to affect only the degree of product differentiation under the standard negligibility hypothesis on the firms' decision making process, while it generates a positive co-movement of demand and demand elasticity, when this assumption is removed and the price index effect is taken into account.
| Titolo: | A Model of Monopolistic Competition with Personal Income Dispersion | |
| Autori: | ||
| Data di pubblicazione: | 2005 | |
| Rivista: | ||
| Abstract: | Abstract. We introduce non-homothetic preferences in the Dixit–Stiglitz model of monopolistic competition, and enquire about the effects of a change in income dispersion on the firms' optimal decisions and market equilibrium. Income dispersion, modeled as a mean preserving spread, is shown to affect only the degree of product differentiation under the standard negligibility hypothesis on the firms' decision making process, while it generates a positive co-movement of demand and demand elasticity, when this assumption is removed and the price index effect is taken into account. | |
| Handle: | http://hdl.handle.net/11587/105615 | |
| Appare nelle tipologie: | Articolo pubblicato su Rivista |
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