Hot answers tagged


I think the best candidate would be monopolistic competition as introduced by Dixit and Stiglitz (1977) Monopolistic Competition and Optimum Product Diversity, in which two models are introduced. One central theme was product variety and the endogenous determination of the number of product varieties. There are many models formulated within the ...


Expenditures on good $2$ are, indeed, included and can vary. We know from Shephard's lemma that whenever the marginal change in expenditure for good $1$ with respect to its price varies with the price of good $1$, the Hicksian demand for good $1$ must vary too. But since utility is fixed, changes in the Hicksian demand for good $1$ require changes in the ...


You already have your answer in the last sentence. A monopoly can be established and that leads to well known "bad" economic consequences, i.e. economic inefficiencies.


There are not just rules but whole theories. Namely cardinal utility allows you to make interpersonal utility comparisons (as opposed to ordinal utility). A common cardinal utility framework is the one based on von Neumann-Morgenstern. Von Neumann-Morgenstern cardinal utility requires that axioms of completeness, transitivity, continuity and independence ...

Only top voted, non community-wiki answers of a minimum length are eligible