Productive Public Expenditure and Imperfect Competition with Endogenous Price Markup: Comment

Luis Costa and Nuno Palma

No 2006/24, Working Papers Department of Economics from ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa

Abstract: In a recent article Chen et al. (2005) analyse the role of government expenditure in an imperfectly competitive static model, introducing a government-expenditure externality through the production function. Our purpose in the present paper is to argue that the claim from the authors that their model generates an endogenous markup is in our view incorrect. We argue that their model does not contain an endogenous markup, but a fixed one and that their claim is based upon an incorrect interpretation of what is the marginal cost in their own model.

Keywords: Endogenous; markup. (search for similar items in EconPapers)
JEL-codes: E12 E62 H54 (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-mac
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Working Paper: Comment on "Productive Public Expenditure and Imperfect Competition with Endogenous Price Markup" (2007)
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