<p>I am editing my question regarding solving the model in order to be more specific.</p>
<p><strong>Regarding the demand side</strong>, In the beginning of the model, we have a CES utility function over a continuum of goods <a href="https://i.sstatic.net/tboJc.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/tboJc.png" alt="enter image description here" /></a></p>
<p>and we have this aggregate price: <a href="https://i.sstatic.net/8Hh5R.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/8Hh5R.png" alt="enter image description here" /></a></p>
<p>How do we use them to get these two equations ? (this is my first question)
<a href="https://i.sstatic.net/A5NCZ.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/A5NCZ.png" alt="enter image description here" /></a></p>
<p><strong>Regarding the production side</strong>, there is only one factor of production which is labor and it is in-elastically supplied, the cost function represents constant marginal costs and overhead cost. l = f +q/<span class="math-container">$\phi$</span>.I understand that in order to get this pricing rule :</p>
<p><a href="https://i.sstatic.net/cUFMQ.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/cUFMQ.png" alt="enter image description here" /></a></p>
<p>we should get the first order condition of the profit function, however I do not know where does the 1/<span class="math-container">$\rho$</span> came from ? (this is my second question)</p>
<p>I apologize if these questions seem silly but I do not have a theoretical background and I am trying to solve the model by myself.</p>
<p>Thanks in advance.</p>

CC BY-SA 4.0
2023-02-26T19:49:56.653Z
What exactly do you mean by "solving" the model? Are you trying to derive all the results from the basic equations?
Giskard
CC BY-SA 4.0
2023-02-26T19:50:52.513Z
If you are not a theory person, may I ask why you are doing this for your thesis...?
Giskard
CC BY-SA 4.0
2023-02-26T20:34:00.950Z
I need it as a theoretical motivation, the main contribution of my thesis is not theoretical, it is empirical, but I need a theoretical framework to motivate it and therefore I want to understand the model.
zmhs
CC BY-SA 4.0
2023-02-28T11:12:31.613Z
Do you have a particular advice on this ? when I started my PhD I did not intend to do this, but I was told that it would be asked from me during my first thesis committee. That is why I am asking.
zmhs
CC BY-SA 4.0
2023-02-28T16:28:06.857Z
I am not familiar with the model, but you might get better responses if you edit your question to clarify/narrow down what it is exactly that you are looking for.
Giskard
CC BY-SA 4.0
2023-02-28T22:17:19.923Z
I suggest you post the specific parts you are struggling with.
BB King
CC BY-SA 4.0
2023-03-01T13:20:55.260Z
Thank you both ! I will have another look to the model and ask more specific questions.
zmhs
CC BY-SA 4.0
2023-03-07T12:40:49.677Z
Hello, I modified my question as you suggested ? Would you have an advise on this ?
zmhs
<microeconomics><mathematical-economics><international-trade><international-economics><theory>
Questions regarding Solving Melitz (2003) model
zmhs
# Questions regarding Solving Melitz (2003) model

(Asked by: username_0 on 2023-02-26)

I am editing my question regarding solving the model in order to be more specific.

**Regarding the demand side**, In the beginning of the model, we have a CES utility function over a continuum of goods [![enter image description here](https://i.sstatic.net/tboJc.png)](https://i.sstatic.net/tboJc.png)

and we have this aggregate price: [![enter image description here](https://i.sstatic.net/8Hh5R.png)](https://i.sstatic.net/8Hh5R.png)

How do we use them to get these two equations ? (this is my first question)
[![enter image description here](https://i.sstatic.net/A5NCZ.png)](https://i.sstatic.net/A5NCZ.png)

**Regarding the production side**, there is only one factor of production which is labor and it is in-elastically supplied, the cost function represents constant marginal costs and overhead cost. l = f +q/$\phi$.I understand that in order to get this pricing rule :

[![enter image description here](https://i.sstatic.net/cUFMQ.png)](https://i.sstatic.net/cUFMQ.png)

we should get the first order condition of the profit function, however I do not know where does the 1/$\rho$ came from ? (this is my second question)

I apologize if these questions seem silly but I do not have a theoretical background and I am trying to solve the model by myself.

Thanks in advance.

**Tags:** microeconomics, mathematical-economics, international-trade, international-economics, theory

> **Comments:**
> **username_1**: What exactly do you mean by "solving" the model? Are you trying to derive all the results from the basic equations?  
> **username_1**: If you are not a theory person, may I ask why you are doing this for your thesis...?  
> **username_0**: I need it as a theoretical motivation, the main contribution of my thesis is not theoretical, it is empirical, but I need a theoretical framework to motivate it and therefore I want to understand the model.  
> **username_0**: Do you have a particular advice on this ? when I started my PhD I did not intend to do this, but I was told that it would be asked from me during my first thesis committee. That is why I am asking.  
> **username_1**: I am not familiar with the model, but you might get better responses if you edit your question to clarify/narrow down what it is exactly that you are looking for.  
> **username_2**: I suggest you post the specific parts you are struggling with.  
> **username_0**: Thank you both ! I will have another look to the model and ask more specific questions.  
> **username_0**: Hello, I modified my question as you suggested ? Would you have an advise on this ?  

---

## 0 answers

