A Statistical Equilibrium Model of Competitive Firms

Albrecht Irle, Mishael Milaković, Simone Alfarano and Jonas Kauschke

No 2008-10, Economics Working Papers from Christian-Albrechts-University of Kiel, Department of Economics

Abstract: We argue that the complex interactions of competitive heterogeneous firms lead to a statistical equilibrium distribution of firms? profit rates, which turns out to be an exponential power (or Subbotin) distribution. Moreover, we construct a diffusion process that has the Subbotin distribution as its stationary probability density, leading to a phenomenologically inspired interpretation of variations in the shape parameter of the statistical equilibrium distribution. Our main finding is that firms? idiosyncratic efforts and the tendency for competition to equalize profit rates are two sides of the same coin.

Keywords: Statistical equilibrium; maximum entropy principle; diffusion process; stochastic differential equation; competition; profit rate (search for similar items in EconPapers)
JEL-codes: C16 D21 E10 L10 (search for similar items in EconPapers)
Date: 2008
New Economics Papers: this item is included in nep-bec, nep-com and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Journal Article: A statistical equilibrium model of competitive firms (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cauewp:7362

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