A Critical Assessment of the Role of Imperfect Competition in Macroeconomics

Dennis Carlton

Chapter 3 in Market Behaviour and Macroeconomic Modelling, 1998, pp 73-104 from Palgrave Macmillan

Abstract: Abstract Models of imperfect competition have proliferated in the macroeconomics literature.1 These models have been used in both the business cycle literature, where the emphasis is on Keynesian type short-run movements in output, and in the growth literature, where long run properties of the economy are analyzed. These models involve firms having market power whereby a firm can profitably set price above marginal cost. Although these models have improved and made more realistic our understanding of certain economic forces, I claim that it is too much to expect these models based solely on market power to provide fundamentally new insights into how an economy works and that there are probably better areas to pursue to look for new insights into macroeconomics.2

Keywords: Marginal Cost; Intellectual Property; Business Cycle; Market Power; Fiscal Policy (search for similar items in EconPapers)
Date: 1998
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Working Paper: A Critical Assessment of the Role of Imperfect Competition in Macroeconomics (1996)
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DOI: 10.1007/978-1-349-26732-3_3

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