Personal Income Distribution and Market Structure
13 Pages Posted: 21 Jul 2002
Date Written: April 2001
Income distribution affects demand and its elasticity, and, as a consequence, the optimal behaviour of firms and market equilibrium. This paper focuses on the effects of income polarisation, and presents a model where - for any unimodal density function describing income distribution of the consumers - income polarisation leads to market concentration, i.e., to a smaller number of firms able to survive in the long run, provided that the firms' fixed costs are sufficiently low.
Keywords: Personal income distribution, income dispersion, demand elas-ticity, Cournot model, free-entry equilibrium
JEL Classification: D31, D43
Suggested Citation: Suggested Citation