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Regular version of the site

The model of monopolistic competition with heterogeneous consumers

Student: Veronika Kurcheeva

Supervisor: Alexander Osharin

Faculty: Faculty of Economics

Educational Programme: Bachelor

Year of Graduation: 2014

<p>The study is devoted to the problem of analyzing models of monopolistic competition and to identifying key factors influencing market demand. Moreover, the paper investigates individual behavior and preferences of consumers by using CES-function depending on consumer&rsquo;s personal income.</p><p>The proposed model extends the traditional Dixit-Stiglitz approach and has a wider range of applications.</p><p>Monopolistic competition is a type of imperfect competition such that many producers sell products that are differentiated from one another and hence are not perfect substitutes. In monopolistic competition, a firm takes the prices charged by its rivals as given and ignores the impact of its own prices on the prices of other firms.</p><p>There are a lot of types of monopolistic competition nowadays, but all of them are imperfect and describe an image close to reality.</p><p>Last time consumer&rsquo;s preferences play huge role in these models. The question of consumer&rsquo;s preferences impact on market structure and international trade is one of the urgent and widely discussed in the contemporary literature. Its importance can be attributed to both the success of theoretical analysis and accumulation of the empirical facts, which cannot be explained by the traditional Chamberlin&rsquo;s and&nbsp; Dixit and Stiglitz&rsquo;s models.</p><p>Using CES-function it is necessary to establish dependence between variety of income in different groups of consumers and market demand. CES-function determines the individual behavior in relation to the consumption of goods. The function is identical for all groups of consumers and depends on elasticity of substitution.</p><p>The issue considered can be a matter of paramount for all those are engaged in international trade area and who regulates monopolistic market in world. They can find out the significance of the studied problem and concentrate recourses on the solving this question.</p><p>The research highlights the problem of identifying links between income disparities and market demand and possible ways to overcome it through investigation of non-price factors.</p><p>The study contributes to analyze monopolistic models with heterogeneous consumers. By using modified CES-function the proposed approach makes it possible to apply preferences and elasticity of substitution in dependency from market demand and takes into account individual and collective behavior of consumers.</p><p>&nbsp;</p><p>&nbsp;</p><p>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;&nbsp;</p>

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