Entry and the accumulation of capital: a two state-variable extension to the Ramsey model

Paulo Brito () and Huw Dixon

No E2007/16, Cardiff Economics Working Papers from Cardiff University, Cardiff Business School, Economics Section

Abstract: In this paper we consider the entry and exit of firms in a dynamic general equilibrium model with capital. At the firm level, there is a fixed cost combined with increasing marginal cost, which gives a standard U-shaped cost curve with optimal firm size. Entry is determined by a free entry condition such that the costs of entry are equal to the present value of incumbent firms, the cost of entry (exit) depends on the flow of entry (exit). Then equilibrium is saddle-point stable and the stable manifold is two-dimensional. Transitional dynamics can, under certain circumstances, be non-monotonic.

Keywords: Entry; dynamics; Ramsey (search for similar items in EconPapers)
JEL-codes: C62 D92 E32 O41 (search for similar items in EconPapers)
Pages: 60 pages
Date: 2007-06, Revised 2007-10
New Economics Papers: this item is included in nep-bec, nep-com, nep-dge, nep-ent, nep-mac, nep-mic and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in International Journal of Economic Theory, , 5, 333-357

Downloads: (external link)
http://carbsecon.com/wp/E2007_16.pdf (application/pdf)

Related works:
Journal Article: Entry and the accumulation of capital: A two state variable extension to the Ramsey model (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cdf:wpaper:2007/16

Access Statistics for this paper

More papers in Cardiff Economics Working Papers from Cardiff University, Cardiff Business School, Economics Section Contact information at EDIRC.
Bibliographic data for series maintained by Yongdeng Xu ().