Economic distributions and primitive distributions in monopolistic competition

Simon Anderson and André de Palma ()

No 10748, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We link fundamental technological and taste distributions to endogenous economic distributions of firm size (output, profit) and prices in extensions of canonical IO and Trade models. We develop a continuous logit model of monopolistic competition to show that exponential or normal distributions respectively generate Pareto or log-normal economic size distributions. Two groups of distributions (output, profit, and quality-cost; and price and cost) are linked through the technological relation between cost and quality-cost. We formulate a general monopolistic competition model and recover the demand structure, mark-ups, and the quality-cost distribution from the output and profit distributions. Adding the price distribution recovers the cost distribution and the relation between quality-cost and cost. We also find long-run equilibrium distributions as a function of the primitives. On the Trade side, we provide a parallel analysis for the CES and break the Pareto circle by introducing quality.

Keywords: Primitive and economic distributions; Price and profit dispersion; General monopolistic competition model; Pareto and log-normal distribution; Logit; Ces (search for similar items in EconPapers)
JEL-codes: L13 (search for similar items in EconPapers)
Date: 2015-08
New Economics Papers: this item is included in nep-com and nep-ind
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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