On The Existence of A Cournot Equilibrium With Endogenous Income

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On The Existence of A Cournot Equilibrium With Endogenous Income

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Laurence Lasselle
Serge Svizzero

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Laurence S. Lasselle

Abstract

We 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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Paper provided by Centre for Research into Industry, Enterprise, Finance and the Firm in its series CRIEFF Discussion Papers with number 0012.

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Date of creation: Feb 2000
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Handle: RePEc:san:crieff:0012

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Find related papers by JEL classification:
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
E24 - Macroeconomics and Monetary Economics - - Macroeconomics: 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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Laurence Lasselle & Serge Svizzero, 2000. "Involuntary Unemployment in Imperfectly Competitive General Equilibrium Models," CRIEFF Discussion Papers 0008, Centre for Research into Industry, Enterprise, Finance and the Firm.
Other versions:
- Lasselle, Laurence S & Svizzero, Serge A, 2002. " Involuntary Unemployment in Imperfectly Competitive General Equilibrium Models," Journal of Economic Surveys, Blackwell Publishing, vol. 16(4), pages 487-507, September. [Downloadable!] (restricted)
Novshek, William, 1985. "On the Existence of Cournot Equilibrium," Review of Economic Studies, Blackwell Publishing, vol. 52(1), pages 85-98, January. [Downloadable!] (restricted)
Other versions:
- Novshek, William., 1984. "On the Existence of Cournot Equilibrium," Working Papers 517, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
Schultz, Christian, 1992. "The impossibility of involuntary unemployment in an overlapping generations model with rational expectations," Journal of Economic Theory, Elsevier, vol. 58(1), pages 61-76, October. [Downloadable!] (restricted)
Other versions:
- Christian Schultz, 1989. "The Impossibility of "Involuntary Unemployment" in an Overlapping Generations Model with Rational Expectations," Discussion Papers 89-18, University of Copenhagen. Department of Economics, revised Oct 1989.
Kaas, Leo, 1998. "Multiplicity of Cournot Equilibria and Involuntary Unemployment," Journal of Economic Theory, Elsevier, vol. 80(2), pages 332-349, June. [Downloadable!] (restricted)
Lasselle, Laurence & Svizzero, Serge, 2001. "The Impossibility of Underemployment with More Than One Product Market," Oxford Economic Papers, Oxford University Press, vol. 53(1), pages 157-65, January.
Laurence Lasselle & Serge Svizzero, 1998. "Involuntary Unemployment and Income Feedback Effects," CRIEFF Discussion Papers 9823, Centre for Research into Industry, Enterprise, Finance and the Firm.
Hart, Oliver, 1982. "A Model of Imperfect Competition with Keynesian Features," The Quarterly Journal of Economics, MIT Press, vol. 97(1), pages 109-38, February. [Downloadable!] (restricted)

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