Non-smooth Dynamics and Multiple Equilibria in a Cournot-Ramsey Model with Endogenous Markups

Paulo M. B. Brito (), Luís Filipe Pereira da Costa () and Huw David Dixon ()

No E2008/21, Cardiff Economics Working Papers from Cardiff University, Cardiff Business School, Economics Section

Abstract: We develop a simple Ramsey model with numerous Cournotian industries where entry generates an endogenous markup. The model produces two different regimes: a monopoly and an oligopoly one. We provide a rigorous study of non-smooth dynamics and we also analyse the global dynamics of the model, demonstrating the model exhibits robust heteroclinic orbits, either of the smooth or the non-smooth type. Similar economies may be in any of these regimes and they may change regime along its convergence path. Fixed costs and elasticities of demand, play a crucial role and changing their values may alter the dynamics in a radical way, either by inducing a discontinuous transition or a discontinuous hysteresis.

Keywords: endogenous mark-ups; non-smooth dynamics; discontinuous induced bifurcations; heteroclinic orbits (search for similar items in EconPapers)
JEL-codes: C62 D43 E32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-mac and nep-mic
Date: 2008-09
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Persistent link: http://EconPapers.repec.org/RePEc:cdf:wpaper:2008/21

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