Monopolistic Competition and Product Diversity: Review and Extension

2021

Rev. CEA

The purpose of this study is to contribute to economic growth theory by introducing Cournot competition into the Solow-Uzawa neoclassical growth model with Zhang’s concept of disposable income and utility function. The Solow-Uzawa two-sector growth model deals with economic growth with two sectors with all the markets perfectly competitive. The final goods sector in this study is the same as that in the Solow model with perfect competition. The consumer goods sector is composed of two firms and characterized by Cournot competition. All the input factors are traded in perfectly competitive markets. The duopoly’s product is solely consumed by consumers. Perfectly competitive firms earn zero profit, while duopolists earn positive profits. This study assumes that the population shares the profits equally. First, we built the dynamic model. Afterward, we found a computational procedure to describe the time-dependent path of the economy and conducted comparative dynamic analyses of some parameters. Finally, we compared the economic performances of the model with Cournot competition and the perfectly competitive model.

Section: Discussionmentioning

confidence: 99%

Cournot-Nash Equilibrium and Perfect Competition in the Solow-Uzawa Growth Model

2021

Rev. CEA

“…Different market structures have different economic efficiencies under varied economic mechanisms. Market structures have been extensively studied in different fields of microeconomics, mostly Business and Economic Research ISSN 2162-4860 2021 in partial and static frameworks (e.g., Nikaido, 1975;Mas-Colell, et al, 1995;Brakman and Heijdra, 2004;Wang, 2012;Murata, 2007, 2017;and Parenti, et al, 2017). It is important to consider efficiencies and distributional impact of different markets in general equilibrium framework.…”

Section: Introductionmentioning

confidence: 99%

An Integration of Neoclassical Growth Theory and Economic Structural Change with Monopolistic Competition Theory

2021

BER

Wealth accumulation is a deterministic factor mechanism of national economic growth. Neoclassical growth theory is basically concerned with capital and wealth accumulation in perfectly competitive market. Global markets are characterized by a great variety of markets. Nevertheless, there only a few rigorous models of wealth accumulation with other types of markets within neoclassical growth framework. This study attempts to contribute literature of economic growth by introducing monopolistic competition and monopoly into neoclassical growth theory. The model is based on a few well-established economic theories. The model is constructed within framework of the Solow-Uzawa two-sector neoclassical growth model. The description of to monopolistic competition is influenced by the Dixit-Stiglitz model of monopolistic competition. The modelling of monopoly is based on monopoly theory. We model behavior of the household with Zhang’s utility function and concepts of current income and disposable income. The unique contribution of this research is to integrate these theories in a comprehensive framework. We construct the basic model and then analyze properties of the model. The existence of a unique equilibrium point is identified by simulation. The effects of changes in some parameters comparative static analyses in some parameters.

“…Different microeconomic theories study efficiencies and equilibrium of different market structures in varied economic institutions (e.g. Nikaido, 1975;Dixit & Stiglitz, 1977;Shapiro, 1989;Mas-Colell et al, 1995;Chang, 2012;Parenti et al, 2017). Nevertheless, most of these studies are conducted with partial analytical frameworks.…”

Section: Introductionmentioning

confidence: 99%

Monopsony and Discrimination in Labor Market in the Solow-Stiglitz Two-Group Neoclassical Growth Model

2020

WJAE

The purpose of this study is to deal with economic growth with labor market monopsony. The economy is composed of one sector (like in the Solow model) and two groups of households (like in the Stiglitz model). The sector uses capital and labor as inputs. Capital and output markets are perfectly competitive. The population is classified into two -discriminatory and discriminated -groups. Labor market for the discriminatory group is perfectly competitive, whereas it is characterized by monopsony for the latter group. We model the behavior of the household with the concept of disposable income and utility function developed by Zhang (2013Zhang ( , 2017. The model endogenously determines the profit of the firm which is equally distributed among the discriminatory population. We build the model and provide a computational procedure to quantify the response of the model economy in a comparative dynamic setting. We also compare the model outcomes with a labor market under perfect competition and under monopsony. We show that monopsony harms not only national economic growth but also the discriminatory household in the long term.