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Existence, Uniqueness and Stability of Equilibrium in an Overlapping Generation Model with Monopolistic Competition and Free Entry and Exit of Firms

Author

Listed:
  • Fernando del Rio

    (Universidade de Santiago de Compostela - Spain)

  • Omar Licandro

    (European University Institute, Florence, Italy)

Abstract

In this paper we have analyzed existence, uniqueness and stability of a steady-state equilibrium in an overlapping generations model with monopolistic competition and free entry and exit of firms. We establish a strenghtened Inada condition that is sufficient to exclude global contraction for any given set of well-behaved preferences. We also establish sufficient conditions for a non-trivial steady-state equilibrium to exist, and also sufficient conditions for its uniqueness and global stability. We show that the size of mark-up over marginal cost and the particular mix of fixed costs play a crucial role in these conditions and consequently on the dynamic behavior of the economy

Suggested Citation

  • Fernando del Rio & Omar Licandro, 2001. "Existence, Uniqueness and Stability of Equilibrium in an Overlapping Generation Model with Monopolistic Competition and Free Entry and Exit of Firms," LIDAM Discussion Papers IRES 2001032, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    • Handle: RePEc:ctl:louvir:2001032
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    References listed on IDEAS

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    More about this item

    Keywords

    Equilibrium; Existence; Monopolistic Competition; Overlapping Generations; Stability; Uniqueness;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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