Dual Equilibria and Discontinuous Response in Monopolistic Competition with Two Classes of Consumers

The possibility of a convex industry demand function's leading to two local profit maxima for a monopolist supplier is found to extend to a model of monopolistic competition where two classes of consumers are distinguished by their relative demand for the industry's products. A long-run, free-entry industry equilibrium is defined and discontinuous responses to changes in parameters are analyzed. Some applications are given and the existence of dual equilibria is shown to be a possibility.