Monopolistic Competition: Beyond the Constant Elasticity of Substitution

We propose a model of monopolistic competition with additive preferences and variable marginal costs. Using the concept of “relative love for variety,” we provide a full characterization of the free‐entry equilibrium. When the relative love for variety increases with individual consumption, the market generates pro‐competitive effects. When it decreases, the market mimics anti‐competitive behavior. The constant elasticity of substitution is the only case in which all competitive effects are washed out. We also show that our results hold true when the economy involves several sectors, firms are heterogeneous, and preferences are given by the quadratic utility and the translog.     

Probabilistic voting and platform selection in multi-party elections

The literature on stochastic voting to date has focused almost exclusively on models with only two candidates (or parties). This paper studies multiparty competition with stochastic voting. We look at two different models in which candidates aim to maximize their expected vote, as well as a model where the objective of candidates is rank minimization. The equilibria of these models are derived and characterized. We show that the properties of the equilibria are quite different from those derived in deterministic models. Furthermore, the analysis shows that deterministic voting models are not robust since the introduction of even a minute level of uncertainty leads to a drastic change in predictions. Consequently, we argue that the deterministic model provides a misleading benchmark. Stochastic models provide a much richer framework, and the nature of the uncertainty in voter choice is a key determinant of the qualtitative properties of the equilibria.The authors thank Martin Osborne and Maurice Salles for useful comments and suggestions. The first author would also like to thank the Bankard Fund for financial support.     

Interregional equilibrium with heterogeneous labor

The impact of labor migration on interregional equilibrium is studied when workers are heterogeneous in productivity and regional mobility. The skilled respond to market disequilibrium by moving into the most attractive region. The unskilled are immobile in the short-run and move with the skilled in the long-run. Both regions have a neoclassical production function affected by an externality depending on the number of skilled. Workers move according to the utility differential when regional amenities vary with population or according to the wage differential. The equilibrium pattern depends on the unskilled‘s mobility and on migration incentives. Typically, regional imbalance characterizes the equilibrium which is often suboptimal. Received November 7, 1994 / Accepted April 12, 1995     

Equilibria in multi-party competition under uncertainty

This paper presents a model of multiparty competition when extraneous considerations unobservable to the parties influence voters' behavior. This leads political parties to model voters' preferences by means of probabilistic choice rules. The equilibrium analysis for 2,..., 6 parties is provided and compared to the outcomes of the standard (certainty) model.We thank one referee for very careful comments. The first author is grateful to the NSF for financial support.