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Monopolistic Competition on the Pyramid
Journal of Industrial Economics
The purpose of this paper is to develop a model of monopolistic competition that has a simple locational interpretation and which allows for multifirm competition. One of the major weaknesses of the standard "circular road" model is the fact that it allows only localized competition. This creates problems when one wishes to analyze problems of international trade, where one often has to work with firms with different production costs. One of the major advantages of the "pyramid" model presented here is that one can easily compute the firms' equilibrium profits even when their production costs differ.
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