On The Social Efficiency In Monopolistic Competition Models

Igor G. Pospelov (National Research University Higher School of Economics) and Stanislav A. Radionov (National Research University Higher School of Economics) has written On The Social Efficiency In Monopolistic Competition Models.

ABSTRACT: We consider standard monopolistic competition models with aggregate consumer's preferences dened by two well-known classes of utility functions | the Kimball utility function and the variable elasticity of substitution utility function. It is known that market equilibruim is ecient only for the special case when utility function has a constant elasticity of substitution, but we nd that in both cases a special tax on rms' output may be introduced such that market equilibrium becomes ecient