Monopolistic Competition and Entrepreneurial RiskRTaking -Too many Cooks Spoil the Broth (but Everyone is better off) -
AbstractThis paper investigates the effects of monopolistic competition on entrepreneurial riskRtaking in a general equilibrium model. In this context, occupational choice of risk averse agents is biased towards rm ownership. In this case, the inef ciencies due to the presence of nonRdiversi able risk are partly compensated by inef ciencies arising from imperfect competition. Comparative static results show that too many rms remain in the market for an increase in the degree of risk aversion, thereby mutually deteriorating pro t opportunities, which provides an explanation for the empirically observed comparably low risk premium on entrepreneurial risk.
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Bibliographic InfoPaper provided by Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät in its series Hannover Economic Papers (HEP) with number dp-303.
Length: 30 pages
Date of creation: Oct 2004
Date of revision:
economics of uncertainty; occupational choice; monopolistic competition;
Find related papers by JEL classification:
- D4 - Microeconomics - - Market Structure and Pricing
- D5 - Microeconomics - - General Equilibrium and Disequilibrium
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-10-21 (All new papers)
- NEP-COM-2004-10-21 (Industrial Competition)
- NEP-ENT-2004-10-21 (Entrepreneurship)
- NEP-MIC-2004-10-21 (Microeconomics)
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