Product Variety and Imperfectly Competitive Free-Entry Industries: Policy Design, Conjectural Equilibria and Consumption Externalities

This paper analyses the properties of a model of imperfect competition in conjunction with a preference for product variety. When the consumer treats product variety as parametric, a tax scheme is described that generates a socially optimal equilibrium from market behaviour. Welfare-improving and optimal commodity taxes are also discussed. An alternative, conjectural, definition of equilibrium is introduced; for a single consumer model this is argued to result in greater variety and utility. If further consumers are introduced, variety causes externalities in consumption; their effects are analysed and policies to overcome these discussed.


Issue Date:
Sep 09 1987
Publication Type:
Working or Discussion Paper
Record Identifier:
http://ageconsearch.umn.edu/record/268244
Language:
English
Total Pages:
41




 Record created 2018-02-13, last modified 2018-02-13

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