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Monopolistic Competition and General Purpose Products
Review of Economic Studies
The development of "general purpose" products means that the needs of quite heterogeneous consumers can be sat isfied with the same homogenous product. The private and social incen tives to produce "general purpose" products are studied in this paper within the "circular-road-model" of monopolistic competition. Th e degree of general purposeness of a product is approximated by its p er unit distance transport costs. It is shown that there are strong f orces leading the market to supply products whose transport costs are excessively low.
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