On the Dixit-Stiglitz model of monopolistic competition (original) (raw)

Our purpose in this note is to revisit the popular monopolistic-competition model of Avinash K. Dixit and Joseph E. and to stress the fact that the variant of this model used in the recent macroeconomic literature is significantly different from the original. In particular, by taking n as the number of active monopolists, the recent discussion of Dixit and Stiglitz (1993) and Xiaokai Yang and Ben J. Heijdra (1993) about the the advantages of neglecting terms of the order 1/n in the computed elasticities, is significantly affected by the choice of the variant of the model.