Personal Income Distribution and Market Structure
Posted: 19 Dec 2002
Income distribution affects market demand and its elasticity, and, as a consequence, the optimal behaviour of firms and market equilibrium. This paper focuses on the effects of income polarization, and presents a model where - for any unimodal density function describing income distribution of the consumers - income polarization 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.
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