Center Research Seminar. Speaker: Igor Bykadorov

On May 29-30, 2012 HSE Center for Market Studies and Spatial Economics held a regular research seminar on the topic: "Investments in productivity under monopolistic competition". Speaker: Igor Bykadorov

И.А.Быкадоров

On May 29-30, 2012 a report on "Investments in productivity under monopolistic competition" by MSSE Associate Researcher Igor Bykadorov (Sobolev Institute of Mathematics SB RAS).

We study impact of market size on endogenous productivity in a monopolistic competition model that allows for general (unspecified) utility and cost functions. A producer can invest in decreasing marginal cost or in increasing quality, whereas free entry drives profits to zero. It turns out that equilibrium investments increase with the market size if and only if utility shows decreasing elasticity of substitution, which is the demand elasticity. We find conditions for social (non-)optimality of the market outcome. Expanding these findings to international trade setting, we find preliminary results on comparative statics of equilibria with respect to the market size and trade costs.

Address of the seminar: Room 205, 3, 10th Line VO.