Author: Vincy FonPublisher:
ISBN:
Category : Equilibrium (Economics)
Languages : en
Pages : 81
Book Description
Three Essays on General Equilibrium and Imperfect Competition
Author: Vincy FonPublisher:
ISBN:
Category : Equilibrium (Economics)
Languages : en
Pages : 81
Book Description
Monopolistic Competition and General Equilibrium Theory
Author: Robert TriffinPublisher:
ISBN:
Category : Competencia
Languages : en
Pages : 216
Book Description
Essays on Imperfect Information and Imperfect Competition
Author: Hassan Afrouzi KhosroshahiPublisher:
ISBN:
Category :
Languages : en
Pages : 394
Book Description
This dissertation investigates three questions about pricing and information acquisition incentives of imperfectly competitive firms, and studies the macroeconomic implications of those incentives within general equilibrium models. Chapter 1 studies why in countries where inflation has been low and stable, price setters display highly dispersed aggregate inflation expectations; especially so when they face fewer competitors. In contrast to the predictions of standard models, realized inflation deviates significantly from price setters’ aggregate inflation expectations. Instead, their own-industry inflation expectations are more accurate, and aggregate inflation tracks these expectations closely. I propose a new dynamic model of rational inattention with oligopolistic competition to explain these stylized facts. The Phillips curve relates aggregate inflation to price setters’ own-industry inflation expectation, and firms forego learning about aggregate variables to focus on their own-industry prices. This incentive is stronger when every firm faces fewer competitors. Using new firm-level survey evidence, I calibrate the degree of rational inattention and industry size in the model and find that a two-fold increase in the number of competitors reduces the half-life and on-impact response of output to a monetary policy shock by 40 and 15 percent, respectively. Chapter 2 is about the behavior of the price-cost markups. The cyclicality of markups is crucial to understanding the propagation of shocks and the comovement of macroeconomic variables. I show that the degree of inertia in the response of output to shocks is a fundamental determining factor for the cyclicality of markups in a broad class of models. In particular, markups follow a forward looking law of motion in which they depend on firms’ conditional expectations over the net present value of all future changes in output. I test this law of motion with data for firms’ expectations and find that, across different types of microfounded models of cyclical markups, the behavior of firms is most consistent with implicit collusion models. Calibrating an implicit collusion model to the U.S. data, I find that markups are procyclical when the model matches the observed inertial response of output to shocks, as commonly found in the data. Chapter 3 studies the pricing behavior of rationally inattentive firms when they face persistent productivity shocks along with transitory demand shocks. I show that prices respond persistently to transitory demand shocks, as firms optimally choose to be confused about the two types of the shocks. When a positive transitory demand shock is realized, it takes time for firms to disentangle it from a supply shock, during which they act as if there was a negative aggregate productivity shock. Therefore, an expansion caused by a positive demand shock is followed by a recession until firms fully recognize the origin of the change in their optimal price. I also develop a tractable method for solving linear quadratic rational inattention models in continuous time and derive semi-analytical results for impulse response functions of endogenous variables under rational inattention.
Three Essays on Imperfect Competition[
Author: Adina Oana ClaiciPublisher:
ISBN: 9788468965215
Category :
Languages : en
Pages : 250
Book Description
General Equilibrium Analysis of Imperfect Competition
Author: ʻAmmā SayāmwālāEssays in Dynamic General Equilibrium
Author: Dân Vuʺ CaoPublisher:
ISBN:
Category :
Languages : en
Pages : 202
Book Description
This thesis consists of three chapters studying dynamic economies in general equilibrium. The first chapter considers an economy in business cycles with potentially imperfect financial markets. The second chapter investigates an economy in its balanced growth path with heterogeneous firms. The third chapter analyzes dynamic competitions that these firms are potentially engaged in. The first chapter, "Asset Price and Real Investment Volatility with Heterogeneous Beliefs," sheds light on the role of imperfect financial markets on the economic and financial crisis 2007-2008. This crisis highlights the role of financial markets in allowing economic agents, including prominent banks, to speculate on the future returns of different financial assets, such as mortgage-backed securities. I introduce a dynamic general equilibrium model with aggregate shocks, potentially incomplete markets and heterogeneous agents to investigate this role of financial markets. In addition to their risk aversion and endowments, agents differ in their beliefs about the future aggregate states of the economy. The difference in beliefs induces them to take large bets under frictionless complete financial markets, which enable agents to leverage their future wealth. Consequently, as hypothesized by Friedman (1953), under complete markets, agents with incorrect beliefs will eventually be driven out of the markets. In this case, they also have no influence on asset prices and real investment in the long run. In contrast, I show that under incomplete markets generated by collateral constraints, agents with heterogeneous (potentially incorrect) beliefs survive in the long run and their speculative activities drive up asset price volatility and real investment volatility permanently. I also show that collateral constraints are always binding even if the supply of collateralizable assets endogenously responds to their price. I use this framework to study the effects of different types of regulations and the distribution of endowments on leverage, asset price volatility and investment. Lastly, the analytical tools developed in this framework enable me to prove the existence of the recursive equilibrium in Krusell and Smith (1998) with a finite number of types. This has been an open question in the literature. The second chapter, "Innovation from Incumbents and Entrants," is a joint work with Daron Acemoglu. We propose a simple modification of the basic Schumpeterian endogenous growth models, by allowing incumbents to undertake innovations to improve their products. This model provides a tractable framework for a simultaneous analysis of entry of new firms and the expansion of existing firms, as well as the decomposition of productivity growth between continuing establishments and new entrants. One lesson we learn from this analysis is that, unlike in the basic Schumpeterian models, taxes or entry barriers on potential entrants might increase economic growth. It is the outcome of the greater productivity improvements by incumbents in response to reduced entry, which outweighs the negative effect of the reduction in creative destruction. As the model features entry of new firms and expansion and exit of existing firms, it also generates an equilibrium firm size distribution. We show that the stationary firm size distribution is Pareto with an exponent approximately equal to one (the so-called "Zipf distribution"). The third chapter, "Racing: when should we handicap the advantaged competitor?" studies dynamic competitions, for example R & D competitions used in the second chapters. Two competitors with different abilities engage in a winner-take-all race; should we handicap the advantaged competitor in order to reduce the expected completion time of the race? I show that if the discouragement effect is strong, i.e., both competitors are discouraged from exerting effort when it becomes more certain who will win the race, we should handicap the advantaged. We can handicap him either by reducing his ability or by offering him a lower reward if he wins. Doing so induces higher effort not only from the disadvantaged competitor because of his higher incentive from a higher chance of winning the race but also from the advantaged competitor because of their strategic interactions. Therefore, the expected completion time is strictly shortened. To prove the existence and uniqueness of the equilibria (including symmetric and asymmetric equilibria) that leads to the conclusion, I use a boundary value problem formulation which is novel to the dynamic competition literature. In some cases, I obtain closed-form solutions of the equilibria.
Three Essays in Economic Theory
Author: Uday RajanTowards a More General Theory of Value
Author: Edward ChamberlinPublisher: New York : Oxford University Press
ISBN:
Category : Competition
Languages : en
Pages : 344
Book Description
Applying General Equilibrium
Author: John B. ShovenPublisher: Cambridge University Press
ISBN: 9780521319867
Category : Business & Economics
Languages : en
Pages : 316
Book Description
The central idea underlying this work is to convert the Walrasian general equilibrium structure (formalized in the 1950s by Kenneth Arrow, Gerard Debreu and others) from an abstract representation of an economy into realistic models of actual economies.
Essays in Dynamic General Equilibrium Theory
Author: Alessandro CitannaPublisher: Springer Science & Business Media
ISBN: 3540271929
Category : Business & Economics
Languages : en
Pages : 278
Book Description
In the area of dynamic economics, David Cass’s work has spawned a number of important lines of research, including the study of dynamic general equilibrium theory, the concept of sunspot equilibria, and general equilibrium theory when markets are incomplete. Based on these contributions, this volume contains new developments in the field, written by Cass's students and co-authors.