Introducing Imperfect Competition in CGE Models:Technical Aspects and Implications
AbstractThis paper considers the technical aspects and the consequences, in terms of simulation results and policy assessment, of introducing imperfect competition in a CGE model. The modifications to the standard CGE framework needed to model imperfect competition in some industries are briefly discussed. Next, the paper examines whether, how much and why, those changes may affect the qualitative output a typical simulation experiment. It is argued that technical choices made in designing the model structure may have a significant impact on the model behavior. This is especially evident when the model output of an imperfect competition closure is compared with the one of a standard closure, assuming perfect competition. As an illustration, a simulation of agricultural trade liberalization is analyzed. Results from the same simulation exercise, but produced by alternative model formulations (one standard competitive and three imperfect competition variants) are presented and discussed. It is found that having imperfect competition in a CGE model does matter in terms of simulation results. Furthermore, alternative formulations of imperfect competition typically bring about quite different findings and implications.
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Bibliographic InfoPaper provided by Department of Economics, University of Venice "Ca' Foscari" in its series Working Papers with number 2006_02.
Length: 22 pages
Date of creation: 2006
Date of revision:
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More information through EDIRC
Computable General Equilibrium Models; Imperfect Competition; Oligopolistic Models; Economies of Scale; Empirical Industrial Organization; Agriculture; Trade Liberalization; Trade Policy.;
Find related papers by JEL classification:
- D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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