Status and welfare under monopolistic competition |
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Authors: | Wai Chiu Woo |
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Institution: | 1. Department of Economics, The Chinese University of Hong Kong, Shatin, Hong Kong
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Abstract: | This article departs from the traditional welfare analysis of social status seeking by incorporating scale economies, product
differentiation, and monopolistic competition into a model. I argue that social status seeking could be welfare improving
rather than the usual conclusion that social status seeking is welfare-reducing, under some assumptions that are not particularly
strong. Market distortions of the quantity–variety and consumption–leisure trade-off may be corrected by social status seeking.
Since modern societies are arguably closer to monopolistic competition than perfect competition, we may also need to rethink
the long-held belief that the welfare effects caused by social status seeking are usually negative. |
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Keywords: | |
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