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The impact of macroeconomic policies in an oligopolistic economy with entry

Published online by Cambridge University Press:  17 August 2016

Dick. Damania  and
Peter Summers
Dick. Damania
Affiliation:
Flinders University of South Australia
Peter Summers
Affiliation:
University of Melbourne
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Summary

This paper examines the impact macroeconomic policies in a system where the product market is modelled as an oligopolistic supergame in which potential entrants incur sunk entry costs. It is shown that policies which affect the interest rate, influence both the degree of competition in the industry and the structure of the industry. Moreover, it is demonstrated that when sunk entry costs are introduced in to the model firms respond in an asymmetric manner to policy changes. These results suggest that the economy may exhibit hysteresis.

Résumé

Résumé

Ce papier étudie l'impact de politiques macroeconomique dans un système où le marché des produits est modèlisé comme un jeu oligopolistique dans lequel les entrants potentiel encourent des coûts d'entrée. Il est montré que des politiques qui affectent le taux d'intérêt, influencent le degré de concurrence et la structure de l'industrie. De plus, il est démontré que quand les coûts d'entrée sont introduits dans le modèle, les firmes répondent de manière asymmetrique aux changements de politique. Ces résultats suggèrent que l'économie peut avoire de l'hysterese.

Keywords

D43E63D43E63
Type
Research Article
Information
Recherches Économiques de Louvain/ Louvain Economic Review , Volume 63 , Issue 3 , 1997 , pp. 225 - 244
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 1997 

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Footnotes

(*)

The authors acknowledge with gratitude the helpful comments of two anonymous referees. The usual disclaimer applies.

References

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