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Title:Industry equilibrium and welfare in monopolistic competition under uncertainty
Authors:Shapoval, Alexander (Author)
Goncharenko, V. M. (Author)
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Work type:Unknown ()
Tipology:1.01 - Original Scientific Article
Organization:UNG - University of Nova Gorica
Abstract:This paper offers a new theory that describes the influence of uncertainty on economic fundamentals. This theory posits that uncertainty can improve social welfare. We argue that in an economy, where spending of the customers for the differentiated good correlates with larger substitutability of its varieties, the equilibrium output decreases and the prices increase when uncertainty appears. Alternatively, if such spending and substitutability anti-correlate, the predictions for the price and output changes are reversed. The arguments are based on general equilibrium modeling with the monopolistic competition of firms which produce varieties of the differentiated good under limited information regarding the consumer demand. The impact of uncertainty on the equilibrium is assessed by using the relationship between the weighted elasticity of substitution between varieties, the elasticity of the consumer utility, and the income share spent on the differentiated good.
Keywords:monopolistic competition, uncertain demand, general utility, consumer welfare
Year of publishing:2020
Number of pages:str. 187-218
Numbering:iss. 2, Vol. 130
COBISS_ID:56699651 Link is opened in a new window
ISSN on article:0931-8658
DOI:10.1007/s00712-019-00687-3 Link is opened in a new window
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Record is a part of a journal

Title:Journal of economics
Shortened title:J. econ.
COBISS.SI-ID:10672729 New window