Economic Theory

Read e-book online Dynamic Macroeconomics with Imperfect Competition PDF

By Dr. Leo Kaas (auth.)

ISBN-10: 3540660291

ISBN-13: 9783540660293

ISBN-10: 3642584799

ISBN-13: 9783642584794

This thesis used to be prompted in the time of my participation in a study venture on Dynamic Macroeconomics, supported through the German study beginning (DFG). the start line was once the important query of the way to combine fee atmosphere organizations in a dynamic disequilibrium version. just about all fresh literature on imperfect festival in macroeconomics applies the target call for strategy by way of assuming that enterprises recognize the genuine call for curve they're confronted with. whereas this strategy may be ap­ plied in transitority financial equilibrium versions, it proves insufficient for formulating cost adjustment in a dynamic disequilibrium version, the place it needs to be changed by way of the concept that of subjective call for. in accordance with this contrast, the thesis begins out with a comparability of the innovations of subjective and aim call for in an summary framework and surveys the literature on normal equilibrium thought with imperfect festival. the target call for strategy is criticized not just at the grounds of its powerful rationality specifications and lifestyles difficulties, but additionally by means of the remark that it can't be utilized effectively to signify determinate rational expectancies equilibria in intertemporal macroeco­ nomics. ultimately, expense atmosphere businesses utilizing subjective call for services are built-in in a dynamic disequilibrium version on the way to examine mo­ nopolistic and oligopolistic fee adjustment.

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Extra resources for Dynamic Macroeconomics with Imperfect Competition

Sample text

Time has no meaning in these models. Nevertheless, the purpose is to 30 CHAPTER 3. GENERAL EQUILIBRIUM give the various equilibrium concepts a dynamic interpretation, as it is possible to understand a perfectly competitive equilibrium as stationary solution of tatonnement processes. In a similar spirit, in this chapter specific dynamic systems with strategic interactions and a fictitious time structure will be specified in order to provide (pseudo-)dynamic foundations of different equilibrium concepts with imperfect competition.

Define L1 by L1 (lit-I) 'ljJj and arbitrary and consistent if ht- I i= li t- I (for instance, by adaptive outcome expectations L1 (ht-I)(at-I, si) = a~_1 + A(at-I a~_I)). 5). D As an illustration of this result, consider a monopolist who believes in a linear inverse demand curve with intercept a and negative slope -b. A consistent learning process may be defined by fixing one parameter a or b and updating of the other parameter. The resulting learning dynamics would have different steady states depending on the fixed parameter.

Furthermore, it is a basic feature of price competition that firms announce their prices for a certain period over which they cannot change them. The above informal arbitrage argument does therefore not apply during such a period. Thus, if one firm changes its price, other firms might ration their demand as long as they are not forced to satisfy it, such that there are positive or negative spillover effects on the demand of the firm who changes the price. This implies that the Walrasian demand ~l does not capture the true demand of a single firm (see Benassy (1988) and Benassy (1991)).

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Dynamic Macroeconomics with Imperfect Competition by Dr. Leo Kaas (auth.)


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