Monopolistic competition and optimum product diversity: comment

Article Abstract:

An alternative solution technique for the basic model of monopolistic competition developed by Avinash K. Dixit and Joseph E. Stiglitz in 1977 is presented. The new solution method takes into consideration the price-index effect while using the symmetry assumption. The validity of the older model is affected by the degree of diversification, and its applications are limited. The new model has a wider variety of applications in areas such as decreasing cost functions.

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Monopolistic competition and optimum product diversity: reply

Article Abstract:

Xiaokai Yang and Ben J. Heijdra modified the original model of monopolistic competition and product diversity developed in 1977. The older model was designed for the large-group case. The newer model was limited to the situation involving a unitary elasticity of substitution between the numeraire good and the monopolistic group. However, the model achieved only a minor correction, while the parameter space was greatly reduced.

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On the Dixit-Stiglitz model of monopolistic competition

Article Abstract:

The optimum product diversity model, also known as the Dixit-Stiglitz monopolistic competition model, defines a general equilibrium with n monopolistic goods and a numeraire good. The numeraire good represents either labor time or total market goods. The enlarged variant of the model adds a labor time good not taken as numeraire and sets a wage-conditional general equilibrium.

Equilibrium (Economics)

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