We show that the market does not systematically deliver the right technology under monopolistic competition. (i) Firms might rush on large-scale technology, pushing to the exit many desirable varieties produced by small firms. (ii) Firms might shun large-scale technology, though that technology would benefit the society through lower prices. (iii) A bias towards small-scale technology in some stage of development, and a bias towards large-scale technology in another stage is also a possibility.
- Monopolistic competition