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Bertrand-Edgeworth equilibrium in a cash-in-advance economy

Author

Listed:
  • Erdem Basai
  • Ismail Saglam

Abstract

This paper is about price and wage competition in a dynamic general equilibrium model. We consider an equity financed economy where firms need money to finance their input costs. Part of the output is sold for money to be used in the next period as working capital and the remaining part is distributed to owners as real dividends. We first characterize the steady state competitive equilibrium path. Second, we study whether this competitive equilibrium can be supported as a pure strategy Nash equilibrium in price and wage setting games. We prove a positive result for price competition and a negative one for wage competition. Copyright 2003, Oxford University Press.

Suggested Citation

  • Erdem Basai & Ismail Saglam, 2003. "Bertrand-Edgeworth equilibrium in a cash-in-advance economy," Oxford Economic Papers, Oxford University Press, vol. 55(4), pages 679-695, October.
    • Handle: RePEc:oup:oxecpp:v:55:y:2003:i:4:p:679-695
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    Cited by:

    1. Basci, Erdem & Erdogan, Ayse M. & Saglam, Ismail, 2006. "Money, Tobin Effect, and Incerasing Returns," MPRA Paper 1904, University Library of Munich, Germany.
    2. Erdogan, Ayse M. & Saglam, Ismail, 2006. "Monetary policy determines the long-run Phillips curve: An OLG model of production with cash-in-advance constraints," Economic Modelling, Elsevier, vol. 23(2), pages 308-315, March.

    More about this item

    JEL classification:

    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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