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Consumption complementarities, monopolies and coordination

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Price-coordination and investment coordination are analyzed in a monopolistic multi-sector general equilibrium model with consumption complementarities. Possible solutions to the investment coordination problem are consistent with historical examples of government intervention in investment, the different roles of banking sectors in different countries, and the effect of optimism on the development of new sectors. Price coordination within sectors between monopolists of complementary intermediaries lowers prices and increases welfare because the competition between the final goods of different sectors then becomes the paramount concern of each monopolist. With no price coordination, each monopolist sets infinite prices as the effect of price increases on demand is shared by all other intermediary monopolists due to the complementarities.

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Paper provided by School of Economics, University of Queensland, Australia in its series Discussion Papers Series with number 444.

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Date of creation: 1998
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Handle: RePEc:qld:uq2004:444

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  1. Martin, Philippe & Rogers, Carol Ann, 1995. "Stabilization Policy, Learning by Doing, and Economic Growth," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1130, C.E.P.R. Discussion Papers.
  2. Xavier Sala-i-Martin, 1995. "Transfers, social safety nets and economic growth," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 139, Department of Economics and Business, Universitat Pompeu Fabra.
  3. Cooper, Russell W. & Johri, Alok, 1997. "Dynamic complementarities: A quantitative analysis," Journal of Monetary Economics, Elsevier, Elsevier, vol. 40(1), pages 97-119, September.
  4. Abigail Barr, 1995. "The missing factor: entrepreneurial networks, enterprises and economic growth in Ghana," Economics Series Working Papers, University of Oxford, Department of Economics WPS/1995-11, University of Oxford, Department of Economics.
  5. Robert J. Barro, 2013. "Inflation and Economic Growth," Annals of Economics and Finance, Society for AEF, vol. 14(1), pages 121-144, May.
  6. Cooper, Russell & John, Andrew, 1988. "Coordinating Coordination Failures in Keynesian Models," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 103(3), pages 441-63, August.
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