Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/81437
Authors: 
Ferguson, Shon
Year of Publication: 
2011
Series/Report no.: 
IFN Working Paper 878
Abstract: 
Recent empirical evidence suggests that prices for some goods and services are higher in larger markets. This paper provides a demand-side explanation for this phenomenon when firms can choose how much to differentiate their products in a model of monopolistic competition with horizontal product differentiation. The model proposes that consumersÂ’ love of variety makes them more sensitive to product differentiation efforts by firms, which leads to higher prices in larger markets. At the same time, endogenous product differentiation modeled in this way can lead to a positive and concave relationship between market size and entry.
Subjects: 
Endogenous Technology
Entry
Market Size Effect
International Trade
Monopolistic Competition
JEL: 
D43
F12
L13
Document Type: 
Working Paper

Files in This Item:
File
Size
187.25 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.