Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

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Monday, February 18, 2013

Models of Competition between Firms: Endogenous Market Structure in the Kaleckian Model

Posted by D. Daniel Sokol

Takashi Ohno, Ritsumeikan University analyzes Models of Competition between Firms: Endogenous Market Structure in the Kaleckian Model.

ABSTRACT: The purpose of this paper is to incorporate free entry into the Kaleckian model. To this end, we consider a model with monopolistic competition, mark‐up pricing and a free‐entry condition. Using this model, the Kaleckian model is unstable under a wage‐led growth regime, and it is stable under a profit‐led growth regime, when the interest rate is supposed to be constant. Stability under a wage‐led growth can be achieved if the interest rate is allowed to respond positively to capacity utilization. We also find that a goods market policy, but not an income distribution policy, is then effective from an economic growth perspective.

http://lawprofessors.typepad.com/antitrustprof_blog/2013/02/models-of-competition-between-firms-endogenous-market-structure-in-the-kaleckian-model.html

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