Our novel approach to modeling monopolistic competition with heterogeneous firms and consumers involves spatial product differentiation. Space can be interpreted either as a geographical space or as a space of characteristics of a differentiated good. In addition to price setting, each firm also...

Even under constant returns to scale technology there is a positive profit return if the goods are produced in monopolistic competition. By a two-periods overlapping generations (OLG) model with production in monopolistic competition under constant returns to scale in which the economy grows by...