On The Existence of A Cournot Equilibrium With Endogenous Income
AbstractWe consider the general equilibrium of an economy with Cournot competition in the product market. In this framework, firms endowed with market power are assumed to know the true or objective demand function. However, depending on the economy's structure, the demand function varies with the size of income feedback effects. Two cases are studied depending on whether the consumers' income is considered by firms as exogenous (no feedback effects) or indogenous (feedback effects) to their actions. We establish a relationship between both cases, that is to say an expression for the demand for goods including feedback effects in terms of the demand without feedback effects. This relationship is useful regarding the conditions ensuring the existence of a Cournot equilibrium and also the features of this equilibrium. We illustrate the latter point through macroeconomic implications such as the debate, full employment vs involuntary unemployment.
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Bibliographic InfoPaper provided by Centre for Research into Industry, Enterprise, Finance and the Firm in its series CRIEFF Discussion Papers with number 0012.
Date of creation: Feb 2000
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feedback effects; price-elasticity;
Find related papers by JEL classification:
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
This paper has been announced in the following NEP Reports:
- NEP-ALL-2001-06-14 (All new papers)
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