A Statistical Equilibrium Model of Competitive Firms
AbstractWe argue that the complex interactions of competitive heterogeneous firms lead to a statistical equilibrium distribution of firms? profit rates, which turns out to be an exponential power (or Subbotin) distribution. Moreover, we construct a diffusion process that has the Subbotin distribution as its stationary probability density, leading to a phenomenologically inspired interpretation of variations in the shape parameter of the statistical equilibrium distribution. Our main finding is that firms? idiosyncratic efforts and the tendency for competition to equalize profit rates are two sides of the same coin. --
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Bibliographic InfoPaper provided by Christian-Albrechts-University of Kiel, Department of Economics in its series Economics Working Papers with number 2008,10.
Date of creation: 2008
Date of revision:
Statistical equilibrium; maximum entropy principle; diffusion process; stochastic differential equation; competition; profit rate;
Other versions of this item:
- Alfarano, Simone & Milaković, Mishael & Irle, Albrecht & Kauschke, Jonas, 2012. "A statistical equilibrium model of competitive firms," Journal of Economic Dynamics and Control, Elsevier, vol. 36(1), pages 136-149.
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- C16 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Econometric and Statistical Methods; Specific Distributions
- E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
- L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-09-13 (All new papers)
- NEP-BEC-2008-09-13 (Business Economics)
- NEP-COM-2008-09-13 (Industrial Competition)
- NEP-MIC-2008-09-13 (Microeconomics)
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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35857, University Library of Munich, Germany.
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