DP1328 From Local to Global Competition

Author(s): Simon P Anderson, André de Palma
Publication Date: January 1996
Keyword(s): CES, Global Competition, Localized Competition, Logit, Monopolistic Competition, Product Differentiation
JEL(s): D43, L13
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=1328

We introduce a framework that has known models of oligopolistic competition with differentiated products (the circle and the constant elasticity of substitution (CES)) as limit cases. This integrative approach incorporates both localized and global competition, as well as price-sensitive individual demands. It is used to consider the qualitative impact of major changes over the last two centuries: reduction in transport costs, increased taste for variety, population growth, and use of technologies with greater returns to scale. We work out the properties of an extended Chamberlinian model that should be useful both in industrial organization and urban economics.