Quaderni del Dipartimento di Scienze Economiche e Matematico-Statistiche dell'Università del Salento - Collana di Economia

Income distribution affects demand and its elasticity, and, as a consequence, the optimal behaviour of firms and market equilibrium. This paper focuses on the effects of income polarisation, and presents a model where for any unimodal density function describing income distribution of the consumers income polarisation 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 succiently low.