Premium
A propos de la concurrence monopolistique et de la diversité optimale de produits: la rente des travailleurs porte à consequence .
Author(s) -
Picard Pierre M.,
Toulemonde Eric
Publication year - 2009
Publication title -
canadian journal of economics/revue canadienne d'économique
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.773
H-Index - 69
eISSN - 1540-5982
pISSN - 0008-4085
DOI - 10.1111/j.1540-5982.2009.01553.x
Subject(s) - monopolistic competition , economic rent , economics , microeconomics , competition (biology) , free entry , earnings , diversity (politics) , product market , general equilibrium theory , barriers to entry , labour economics , monopoly , ecology , incentive , accounting , sociology , anthropology , biology
In the Dixit‐Stiglitz model of monopolistic competition, entry of firms is socially too small. Other authors have shown that excess entry is also a possibility with other preferences for diversity. We show that workers' rents also contribute to explain excess entry through a general equilibrium mechanism. Larger wages indeed raises the aggregate earnings and firms sales and profits, which entices too many firms to enter. We discuss the possibility of over‐provision of varieties by comparing the equilibrium to unconstrained and constrained social optima and to other regulatory frameworks where wages are not controlled.