Retailer leadership under monopolistic competition

Abstract

A modification of the Dixit-Stiglitz model, supplemented by retailing, is investigated, namely, various situations of equilibrium according to Stackelberg are considered under the leadership of the retailer and the free entry condition of manufacturers to the market. For each of the situations, detailed solutions were provided, which were considered taking into account the preferences of the participants in the market interaction. This allows us to understand the occurrence of which of the considered situations is most beneficial for the retailer, manufacturers and for society as a whole. Moreover, optimal taxation is considered. Situations are revealed when it is beneficial for the state to tax the producer, and when, on the contrary, to subsidize the producer.