About this ebook
In the 1990s, growth theory has incorporated imperfect competition in its investigations. This innovation has proven to be seminal: Cleviating from growth models with perfect competition, the new framework featured forward looking entrepreneurs. Firms maximize profits intertemporarily, i. e. their in vestment leads to instantaneous sunk costs and offers flows of future profits. Firms finance this investment by launching shares. The capital market is per fectly competitive, implying that the return on a share is equal to the return on a bond. As opposed to the capital market, the goods market is imperfectly competitive. As a result of investment, firms enjoy market power. That is, firms may acquire the capability to provide a product that is differentiated in, e. g. , styling, technology, accessibility, or reputation. The launch of a dif ferentiated product allows to capture a market niche, and successful firms may price above marginal cost. The resulting profit flows are channelled to the firms' shareholders. The introduction of monopolistic competition into growth theory is valuable: real world economies may be portrayed rather by such an imperfect competition framework than by a perfect competition approach. Starting with Romer (1990), in growth theory, modeling of imperfect competition has been notoriously bound to a focus on the impact of research and development (R&D) on economic growth. In the existing literature, growth-affecting investment is restricted to R&D investment.
Ratings and reviews
4.0
2 reviews
Anil Das
- Flag inappropriate
November 2, 2020
AAA
Rate this ebook
Tell us what you think.
Reading information
Smartphones and tablets
Install the Google Play Books app for Android and iPad/iPhone. It syncs automatically with your account and allows you to read online or offline wherever you are.
Laptops and computers
You can listen to audiobooks purchased on Google Play using your computer's web browser.
eReaders and other devices
To read on e-ink devices like Kobo eReaders, you'll need to download a file and transfer it to your device. Follow the detailed Help Center instructions to transfer the files to supported eReaders.
