THE MONOPOLISTIC COMPETITION MODELS: RETAILER’S LEADERSHIP UNDER FREE ENTRANCE
S.B. Barabash1, I.A. Bykadorov1,2,3, M.V. Pudova1
1Novosibirsk State University of Economics and Management, Str. Kamenskaya, 56, Novosibirsk, 630099, Russia
2Sobolev Institute of Mathematics SB RAS, Acad. Koptyug avenue, 4, 630090 Novosibirsk Russia
3Novosibirsk National Research State University, Str. Pirogov, d. 2, Novosibirsk, 630090, Novosibirsk region
Keywords: теория отраслевых рынков, модель Диксита-Стиглица, монополистическая конкуренция, вертикальное взаимодействие, лидерство ритейлера, условие «свобода входа», благосостояние, industrial organization theory, Dixit-Stiglitz model, monopolistic competition, vertical relations, retailer’s dominant, entrance fee, welfare
Subsection: THEORETICAL SEARCH AND OFFERS
Abstract
We study a model of monopolistic competition of Dixit-Stiglitz type with retailer (intermediary). Retailer-monopolist deals with a continuum of producers and «representative» consumer. The behavior of each producer is described by the linear costs; each producer produces one type of goods («variety») and sets the price of the goods. Preferences of the representative consumer describes by a quadratic utility function that corresponds to the linear demand. The retailer, being a market leader, chooses a number («mass») of producers and retail premium. We study the various variants of the retailer’s behavior under «zero-profit condition» («free entry and exit»: producers are free to enter the market if their profit is positive, and may leave the market, as soon as their profit becomes negative). We study what kind of the retailer’s behavior is most favorable for each of the market players: for the retailer, for the representative consumer, as well as for the society.
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