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Consumption complementarities, monopolies and coordination

Price-coordination and investment coordination are analyzed in a monopolistic multi-sector general equilibrium model with consumption complementarities. Possible solutions to the investment coordination problem are consistent with historical examples of government intervention in investment, the different roles of banking sectors in different countries, and the effect of optimism on the development of new sectors. Price coordination within sectors between monopolists of complementary intermediaries lowers prices and increases welfare because the competition between the final goods of different sectors then becomes the paramount concern of each monopolist. With no price coordination, each monopolist sets infinite prices as the effect of price increases on demand is shared by all other intermediary monopolists due to the complementarities.

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Paper provided by School of Economics, University of Queensland, Australia in its series Discussion Papers Series with number 444.

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Date of creation: 1998
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Handle: RePEc:qld:uq2004:444
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  1. Cooper, Russell & John, Andrew, 1988. "Coordinating Coordination Failures in Keynesian Models," The Quarterly Journal of Economics, MIT Press, vol. 103(3), pages 441-63, August.
  2. Martin, Philippe & Rogers, Carol Ann, 1997. "Stabilization Policy, Learning-by-Doing, and Economic Growth," Oxford Economic Papers, Oxford University Press, vol. 49(2), pages 152-66, April.
  3. Xavier Sala-I-Martin, 1997. "Transfers, Social Safety Nets, and Economic Growth," IMF Staff Papers, Palgrave Macmillan, vol. 44(1), pages 81-102, March.
  4. Robert J. Barro, 1995. "Inflation and Economic Growth," NBER Working Papers 5326, National Bureau of Economic Research, Inc.
  5. Russell Cooper & Alok Johri, 1996. "Dynamic Complementarities: A Quantitative Analysis," NBER Working Papers 5691, National Bureau of Economic Research, Inc.
  6. Abigail Barr, 1995. "The missing factor: entrepreneurial networks, enterprises and economic growth in Ghana," Economics Series Working Papers WPS/1995-11, University of Oxford, Department of Economics.
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