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Existence, Uniqueness and Stability of Equilibrium in an Overlapping Generation Model with Monopolistic Competition and Free Entry and Exit of Firms

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Author Info
Fernando del Rio (Universidade de Santiago de Compostela - Spain)
Omar Licandro (European University Institute, Florence, Italy)

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Abstract

In this paper we have analyzed existence, uniqueness and stability of a steady-state equilibrium in an overlapping generations model with monopolistic competition and free entry and exit of firms. We establish a strenghtened Inada condition that is sufficient to exclude global contraction for any given set of well-behaved preferences. We also establish sufficient conditions for a non-trivial steady-state equilibrium to exist, and also sufficient conditions for its uniqueness and global stability. We show that the size of mark-up over marginal cost and the particular mix of fixed costs play a crucial role in these conditions and consequently on the dynamic behavior of the economy

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Publisher Info
Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 2001032.

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Length: 18
Date of creation: 01 Oct 2001
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Handle: RePEc:ctl:louvir:2001032

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Related research
Keywords: Equilibrium; Existence; Monopolistic Competition; Overlapping Generations; Stability; Uniqueness;

Find related papers by JEL classification:
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
D90 - Microeconomics - - Intertemporal Choice and Growth - - - General
E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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    Other versions:
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  6. Boeri, Tito & Cramer, Ulrich, 1992. "Employment growth, incumbents and entrants : Evidence from Germany," International Journal of Industrial Organization, Elsevier, vol. 10(4), pages 545-565, December. [Downloadable!] (restricted)
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