Existence, Uniqueness, and Stability of Equilibrium in an Overlapping Generation Model with Monopolistic Competition and Free Entry and Exit of Firms
(2001)
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- Abstract
- In this paper, we have analyzed existence, uniqueness and stability of 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.
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Citations
del Rio, F., & Licandro-Goldaracena, O. (2001). Existence, Uniqueness, and Stability of Equilibrium in an Overlapping Generation Model with Monopolistic Competition and Free Entry and Exit of Firms (ECON Working Papers 2001/32). https://hdl.handle.net/2078.5/130095