On the Microfoundation of Linear Oligopoly Demand

I. Bos; D. Vermeulen

doi:10.1515/bejte-2019-0114

On the Microfoundation of Linear Oligopoly Demand

I. Bos^*, D. Vermeulen

^*Corresponding author for this work

Research output: Contribution to journal › Article › Academic › peer-review

Abstract

We critically assess the representative consumer with quadratic aggregate utility function which forms the foundation of a well-known class of linear oligopoly demand structures. It is argued that this approach is problematic and redundant. Regarding the latter, we show how the same demand system can be derived directly from a population of heterogeneous buyers for any number of products. Welfare analyses based on aggregate demand is shown to be sensitive to the underlying microfoundation.

Original language	English
Pages (from-to)	1-15
Number of pages	15
Journal	B E Journal of Theoretical Economics
Volume	22
Issue number	1
DOIs	https://doi.org/10.1515/bejte-2019-0114
Publication status	Published - 19 Jan 2022

JEL classifications

b40 - Economic Methodology: General
l10 - Market Structure, Firm Strategy, and Market Performance: General

Keywords

microfoundations
oligopoly theory
product differentiation
representative consumer models
QUANTITY COMPETITION
PRICE

Access to Document

10.1515/bejte-2019-0114

Cite this

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