General Equilibrium Theories of Imperfect Competition

In a pure exchange economy, the authors propose a general equilibrium concept under imperfect competition, the ‘Cournotian monopolistic competition equilibrium,’ and compare it to the Cournot-Walras and the monopolistic competition concepts. The advantage of the proposed concept is to require less computational ability from the agents. The comparison is made first through a simple example, then through a more abstract concept, the P-equilibrium, based on a general notion of price coordination, the pricing-scheme. [2] Egbert Dierker and Hildegard Dierker. General Equilibrium with Imperfect Competition. Journal of the European Economic Association, 4(2-3):436– 445, April-May 2006. Abstract: The objective of a firm is not well-defined if firms have market power. We present an example of Cournot-Walras competition in order to shed light on this problem and to motivate the concept of real wealth maximization that B. Grodal and E. Dierker have proposed as the firm’s objective. The objective of a firm is not well-defined if firms have market power. We present an example of Cournot-Walras competition in order to shed light on this problem and to motivate the concept of real wealth maximization that B. Grodal and E. Dierker have proposed as the firm’s objective. [3] Paolo Epifani and Gino Gancia. Increasing Returns, Imperfect Competition, and Factor Prices. Review of Economics and Statistics, 88(4):583–98, November 2006. Abstract: We show how, in general equilibrium models featuring increasing returns, imperfect competition, and endogenous markups, changes in the scale of economic activity affect the income distribution across factors. Whenever final goods are gross substitutes (gross complements), a scale expansion raises (lowers) the relative reward of the scarce factor or the factor used intensively in the sector characterized by a higher degree of product differentiation and higher fixed costs. Under very reasonable hypotheses, our theory suggests that scale is skill-biased. This result provides a micro foundation for the secular increase in the relative demand for skilled labor. Moreover, it constitutes an important link among major explanations for the rise in wage inequality: skill-biased technical change, capital-skill complementarities, and international trade. We provide new evidence on the mechanism underlying the skill bias of scale. We show how, in general equilibrium models featuring increasing returns, imperfect competition, and endogenous markups, changes in the scale of economic activity affect the income distribution across factors. Whenever final goods are gross substitutes (gross complements), a scale expansion raises (lowers) the relative reward of the scarce factor or the factor used intensively in the sector characterized by a higher degree of product differentiation and higher fixed costs. Under very reasonable hypotheses, our theory suggests that scale is skill-biased. This result provides a micro foundation for the secular increase in the relative demand for skilled labor. Moreover, it constitutes an important link among major explanations for the rise in wage inequality: skill-biased technical change, capital-skill complementarities, and international trade. We provide new evidence on the mechanism underlying the skill bias of scale. [4] Jean J. Gabszewicz. Strategic multilateral exchange: General equilibrium with imperfect competition. Elgar, Northampton, Mass., 2002.