Monopolistic Competition in General Equilibrium: Beyond the CES

Posted by D. Daniel Sokol

Evgeny Zhelobodko (Novosibirsk State University (Russia)) Sergey Kokovin (Novosibirsk State University and Sobolev Institute of Mathematics (Russia)) Mathieu Parenti (Universite de Paris 1 and PSE (France)) Jacques-François Thisse (CORE-UCLouvain (Belgium), CREA, Universite du Luxembourg, and CEPR.) address Monopolistic Competition in General Equilibrium: Beyond the CES.

ABSTRACT: We determine the endogenous order of moves in a mixed price-setting duopoly. In contrast to the existing literature on mixed oligopolies we establish the payoff equivalence of the games with an exogenously given order of moves. Hence, it does not matter whether one becomes a leader or a follower. We also establish that replacing a private firm by a public firm in the standard Bertrand-Edgeworth game with capacity constraints increases social welfare and that a pure-strategy equilibrium always exists.