Inequality in Models with a Competition for Market Shares
University of Zurich, Department of Economics, Working Paper No. 375, January 2021
74 Pages Posted: 19 Jan 2021
Date Written: January 4, 2021
This paper develops a framework to systematically study how changes in market conditions affect the equilibrium inequality between heterogeneous agents. By stating our setting as a "competition for market shares", we can derive inequality predictions for vastly different competition models. This approach allows us to identify a common structure, e.g., in monopolistic competition, perfect competition, or competition for prizes, that explains why these models deliver similar inequality predictions. We apply our results to problems from trade, competition theory, consumption inequality, political economics and marketing, and relate some of the predicted inequality patterns to empirical evidence.
Keywords: Inequality analysis, market shares, power functions, monopolistic competition, perfect competition competition for prizes
JEL Classification: C65, D30, D41, E10, L11, M37
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