Avinash Dixit: Strategy and Monopolistic Competition

How Princeton economist Avinash Dixit co-created the Dixit-Stiglitz model of monopolistic competition, and popularised game theory in "Thinking Strategically".

Avinash Dixit (born 1944) is a Mumbai-born economist at Princeton.

Dixit-Stiglitz model

With Joseph Stiglitz, Dixit published a 1977 model of monopolistic competition: many firms selling differentiated products.
It became a foundation for new trade theory, growth theory and economic geography, used by Paul Krugman and others.

Game theory

Co-authored Thinking Strategically (1991) with Barry Nalebuff, explaining game theory for general readers.

Investment under uncertainty

With Robert Pindyck, he wrote Investment Under Uncertainty (1994), showing why firms may wait before making irreversible investments.

Lawlessness and economics

His book Lawlessness and Economics (2004) studied how trade works when legal systems are weak.

Legacy

Dixit’s models are taught in graduate economics worldwide.

The many brands

Dixit-Stiglitz helps explain why markets have many varieties of shampoo, each with some pricing power but facing competition.

Thinking economic models only describe perfect competition

Dixit-Stiglitz models differentiated products.

Key takeaways

Dixit and Stiglitz modelled monopolistic competition in 1977.
The model underpins new trade theory.
He popularised game theory in Thinking Strategically.
He studied investment under uncertainty.