The aggregate Le Chatelier Samuelson principle with Cournot competition

Bertrand Koebel and Francois Laisney

No 10-009, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: This paper studies the aggregate substitution and expansion effects triggered by changes in input prices, in a context where firms supply a homogenous commodity and compete in quantities à la Cournot. We derive a sufficient condition for the existence of a Cournot equilibrium and show that this condition also ensures that the Le Chatelier-Samuelson principle is likely to be satisfied in the aggregate at the Cournot equilibrium, although it may not be satisfied at the firm level. These results are confirmed by the empirical findings obtained for two-digit US manufacturing industries, which also highlight the importance of imperfect competition for understanding aggregate growth, investment and employment.

Keywords: Aggregation; returns to scale; market power; markup; own-price elasticity (search for similar items in EconPapers)
JEL-codes: C33 D24 (search for similar items in EconPapers)
Date: 2010
New Economics Papers: this item is included in nep-bec and nep-com
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:10009

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