Endogenous Mode of Competition in General Equilibrium

35 Pages Posted: 3 Jan 2007

See all articles by J. Peter Neary

J. Peter Neary

University of Oxford - Department of Economics; Centre for Economic Policy Research (CEPR)

Joe Thakaran

University of Liège - Department of Economics

Date Written: November 2006

Abstract

This paper endogenises the extent of intra-sectoral competition in a multi-sectoral model of oligopoly in general equilibrium. Firms choose capacity followed by prices. If the benefits of capacity investment in a given sector are below a threshold level, the sector exhibits Bertrand behaviour, otherwise it exhibits Cournot behaviour. By endogenising the threshold parameter in general equilibrium, we show how exogenous shocks alter the mix of sectors between 'more' and 'less' competitive, or Bertrand and Cournot. The model also has implications for the effects of trade liberalisation and technological change on the relative wages of skilled and unskilled workers.

Keywords: Bertrand and Cournot competition, GOLE (General Oligoplistic Equilibrium), Kreps-Scheinkman, market integration

JEL Classification: F10, F12, L13

Suggested Citation

Neary, J. Peter and Thakaran, Joe, Endogenous Mode of Competition in General Equilibrium (November 2006). CEPR Discussion Paper No. 5943, Available at SSRN: https://ssrn.com/abstract=954606

J. Peter Neary (Contact Author)

University of Oxford - Department of Economics ( email )

Manor Road Building
Manor Road
Oxford, OX1 3BJ
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Joe Thakaran

University of Liège - Department of Economics ( email )

7 Boulevard du Rectorat
Batiment B31
4000 Liege
Belgium

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
17
Abstract Views
943
PlumX Metrics