Existence, Uniqueness and Stability of Equilibrium in an Overlapping Generation Model with Monopolistic Competition and Free Entry and Exit of Firms

Fernando del Río and Omar Licandro ()

No 2001032, LIDAM Discussion Papers IRES from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: In this paper we have analyzed existence, uniqueness and stability of a steady-state equilibrium in an overlapping generations model with monopolistic competition and free entry and exit of firms. We establish a strenghtened Inada condition that is sufficient to exclude global contraction for any given set of well-behaved preferences. We also establish sufficient conditions for a non-trivial steady-state equilibrium to exist, and also sufficient conditions for its uniqueness and global stability. We show that the size of mark-up over marginal cost and the particular mix of fixed costs play a crucial role in these conditions and consequently on the dynamic behavior of the economy

Keywords: Equilibrium; Existence; Monopolistic Competition; Overlapping Generations; Stability; Uniqueness (search for similar items in EconPapers)
JEL-codes: D43 D90 E13 O40 (search for similar items in EconPapers)
Pages: 18
Date: 2001-10-01
New Economics Papers: this item is included in nep-dge and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:ctl:louvir:2001032

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