In the section Articles
Title of the article Monopolistic Competition in Two-Sector Economy under Demand Uncertainty
Pages 12-25
Author 1 Alexander Borisovich Shapoval
Doctor of Physical and Mathematical, Professor, Leading Researcher
Financial University under the Government of the Russian Federation NES CSDSINRU HSE
49 Leningradskiy pr., Moscow, Russia, 12546847 Nakhimovskiy pr., Moscow, Russia, 11741820 Myasnitskaya Street, Moscow, Russia, 101000
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Author 2 Vasiliy Mikhailovich Goncharenko
Candidate of Physical and Mathematical, Assistant Professor.
Financial University under the Government of the Russian Federation
49 Leningradskiy pr., Moscow, Russia, 125468
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Abstract The article deals with the theory of monopolistic competition under demand uncertainty. The authors consider the economy with labor immobility consisting of the high-tech sector with monopolistic competition and the standard sector with perfect competition. Preferences between sectors are specified by the Cobb - Douglas production function. It is assumed that companies make output decisions under preferences uncertainty and consumers’ distribution by sectors will be known by the time of realization. It means that firms are informed about consumer demand with accuracy up to a multiplicative uncertainty which is generated by random parameters in the Cobb - Douglas production function. The paper shows that demand uncertainty leads to consistent growth of prices and wages in high-tech sector in relation to salaries in the second sector. The impact of uncertainty on welfare is ambiguous. In particular, under the known expected value of uncertainty customers derive benefit from exaggerated companies’ expectations about clients’ desire to consume high-tech goods.
Code 339.133.017, 339.5.012.42
DOI 10.14530/se.2014.3.12-25
Keywords ♦ monopolistic competition ♦ backward induction ♦ demand uncertainty
Download SE.2014.3.012-025.Shapoval.pdf
For citation Shapoval A.B., Goncharenko V.M. Monopolistic Competition in Two-Sector Economy under Demand Uncertainty. Prostranstvennaya Ekonomika = Spatial Economics, 2014, no. 3, pp. 12-25. DOI: 10.14530/se.2014.3.12-25. (In Russian).
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