Constant Elasticity of Substitution Measure

See: Elasticity of Substitution, Economics, Production Function, Utility Function.

References

(Wikipedia, 2016) ⇒ http://en.wikipedia.org/wiki/constant_elasticity_of_substitution Retrieved:2016-1-5.
- Constant elasticity of substitution (CES), in economics, is a property of some production functions and utility functions.
  Specifically, it arises in a particular type of aggregator function which combines two or more types of consumption, or two or more types of productive inputs into an aggregate quantity. This aggregator function exhibits constant elasticity of substitution.

(Zhelobodko et al., 2012) ⇒ Evgeny Zhelobodko, Sergey Kokovin, Mathieu Parenti, and Jacques‐François Thisse. (2012). “Monopolistic Competition: Beyond the Constant Elasticity of Substitution." Econometrica 80, no. 6
- ABSTRACT: We propose a model of monopolistic competition with additive preferences and variable marginal costs. Using the concept of “relative love for variety,” we provide a full characterization of the free-entry equilibrium. When the relative love for variety increases with individual consumption, the market generates pro-competitive effects. When it decreases, the market mimics anti-competitive behavior. The constant elasticity of substitution is the only case in which all competitive effects are washed out. We also show that our results hold true when the economy involves several sectors, firms are heterogeneous, and preferences are given by the quadratic utility and the translog.