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On the Stabilizing Virtues of Imperfect Competition

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  • Thomas Seegmuller

    (EUREQUA - Equipe Universitaire de Recherche en Economie Quantitative - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

Abstract

We analyze the stabilizing role of imperfect competition on fluctuations due to indeterminacy and endogenous cycles. In this paper, imperfect competition is a source of monopoly profits, because of producer market power. Considering anoverlapping generations model with capital accumulation and elastic labor supply, we show that under imperfect competition, the emergence of endogenous fluctuations requires a weaker substitution between production factorsthan under perfect competition. In this sense, imperfect competition stabilizes fluctuations. However, we find an opposite conclusion concerning the elasticity of labor supply. Indeed, endogenous fluctuations are compatible with a less elastic labor supply under imperfect competition.

Suggested Citation

  • Thomas Seegmuller, 2005. "On the Stabilizing Virtues of Imperfect Competition," Post-Print halshs-00194173, HAL.
    • Handle: RePEc:hal:journl:halshs-00194173
    DOI: 10.1111/j.1742-7363.2005.00019.x
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00194173
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    References listed on IDEAS

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    1. Joaquim Silvestre, 1995. "Market Power in Macroeconomic Models: New Developments," Annals of Economics and Statistics, GENES, issue 37-38, pages 319-356.
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    13. Thomas Seegmuller, 2005. "Steady state analysis and endogenous fluctuations in a finance constrained model," Cahiers de la Maison des Sciences Economiques v05029, Université Panthéon-Sorbonne (Paris 1).
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    Cited by:

    1. Seegmuller, Thomas, 2008. "Taste For Variety And Endogenous Fluctuations In A Monopolistic Competition Model," Macroeconomic Dynamics, Cambridge University Press, vol. 12(4), pages 561-577, September.

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