Selection of Boundedly Rational Firms and the Allocation of Resources
AbstractI study how savers allocate funds between boundedly rational firms which follow simple pricing rules. Firms need cash to pay their inputs in advance, and savers-shareholders allocate cash between them so as to maximize their rate of return. When the rate of return on each firm is observed, there are multiple equilibria, and some degree of monopoly power is sustained. However, the economy gets close to the Walrasian equilibrium when the availability of funds goes to infinity. Multiple equilibria also arise when there are âentrantsâ with unobservable rates of return. In an equilibrium where entrants are not funded, savers invest in incumbents because those entrants which will divert customers from incumbents are likely to be excess underpricers.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Institut d'Économie Industrielle (IDEI), Toulouse in its series IDEI Working Papers with number 417.
Date of creation: Oct 2006
Date of revision:
Contact details of provider:
Postal: Manufacture des Tabacs, Aile Jean-Jacques Laffont, 21 Allée de Brienne, 31000 TOULOUSE
Phone: +33 (0)5 61 12 85 89
Fax: + 33 (0)5 61 12 86 37
Web page: http://www.idei.fr/
More information through EDIRC
Other versions of this item:
- Saint-Paul, Gilles, 2006. "Selection of Boundedly Rational Firms and the Allocation of Resources," CEPR Discussion Papers 5928, C.E.P.R. Discussion Papers.
- D4 - Microeconomics - - Market Structure and Pricing
- D5 - Microeconomics - - General Equilibrium and Disequilibrium
- Z1 - Other Special Topics - - Cultural Economics
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.