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Imperfect Competition in an Overlapping Generations Model : A Case for Fiscal Policy

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  • d ASPREMONT, Claude

    (CORE, Université catholique de Louvain, B-1348 Louvain-la-Neuve, Belgium)

  • DOS SANTOS FERREIRA, Rodolphe

    (BETA, Université Louis Pasteur, Strasbourg)

  • GERARD-VARET, Louis-André

    (GREQAM-UMR 9990 - CNRS - EHESS - Universités Aix-Marseille 2 et 3, Marseille)

Abstract

Imperfect competition is a meaningful feature for macroeconomic analysis only to the extent that is leads to properties qualitatively different from those obtained under perfect competition. In particular, we have to wonder how imperfect competition per se may find an alternative fiscal policy. For that matter we consider a simple overlapping generations model with firms acting as Cournot oligopolists in the good market. Through fiscal policy, a government, keeping the stock of money constant, retributes wealth amoung generations and absorb some of the output to provide public services. We show in this model that fiscal policy, by affecting firms’market power, can move the economy across perfect foresight stationary equilibria along a Pareto improving path, or that it can implement a full employment stationary equilibrium which Pareto-dominates underemployment equilibria

Suggested Citation

  • d ASPREMONT, Claude & DOS SANTOS FERREIRA, Rodolphe & GERARD-VARET, Louis-André, 1994. "Imperfect Competition in an Overlapping Generations Model : A Case for Fiscal Policy," LIDAM Discussion Papers CORE 1994077, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:1994077
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    1. repec:ums:papers:2012-10 is not listed on IDEAS
    2. Costa, Luís F. & Dixon, Huw David, 2011. "Fiscal policy under imperfect competition with flexible prices: An overview and survey," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 5, pages 1-57.

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