Monopolistic Competition with Generalized Additively Separable Preferences

We study monopolistic competition equilibria with free entry and social planner solutions under symmetric Generalized Additively Separable preferences (that encompass known cases such as additive, homothetic, translog and other preferences). This setting can jointly produce competition and selection effects of entry, incomplete pass-through of cost changes and pricing to market. We discuss the inefficiencies of the market equilibrium under Gorman-Pollak preferences and show its optimality under implicit CES preferences. We propose a new specification of generalized translated power preferences and discuss applications to trade and macroeconomics.