Review of Economic Studies Vol. 61 No. 1 1994
Monopolistic Competition with Endogenous Specialization
Abstract
In the model of monopolistic competition on the circle, a product is identified by a single locational characteristic representing its brand or variety. The ability of a variety to compete with other varieties a given distance away (its specialization as quantified by transportation losses) is exogenously given in the standard model. Here, specialization is a choice variable selected by the firm. An equilibrium is derived, where the degree of specialization is endogenously determined. The effect of endogenizing specialization makes the Hotelling-Lancaster-Chamberlin model of monopolistic competition isomorphic to the Dixit-Stiglitz-Ethier formulation, without sacrificing the appealing concept of product 'distance.'
- DOI
- 10.2307/2297876
- Volume
- 61
- Issue
- 1
- Pages
- 45-56
- Language
- en
- Sources
- bibtex:phds-export.bib crossref openalex