Non-smooth dynamics and multiple equilibria in a Cournot–Ramsey model with endogenous markups

Paulo Brito (), Luis Costa and Huw Dixon

Journal of Economic Dynamics and Control, 2013, vol. 37, issue 11, 2287-2306

Abstract: We consider a Ramsey model with a continuum of Cournotian industries where free entry generates an endogenous markup. The model produces two different regimes, monopolistic and Cournotian monopolistic competition, resulting in non-smooth dynamics. We analyze the global dynamics of the model, demonstrating it may exhibit heteroclinic orbits connecting multiple equilibria. Small transitory changes in parameters can lead to large permanent effects and there can be a poverty trap separating a low-capital and high-markup equilibrium from a high-capital low-markup equilibrium. We apply results from the mathematics of non-smooth dynamic systems, which provide a more general framework for understanding regime switching.

Keywords: Endogenous markups; Regime switch; Discontinuity-induced bifurcations (search for similar items in EconPapers)
JEL-codes: C62 D43 E32 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Working Paper: Non-smooth Dynamics and Multiple Equilibria in a Cournot-Ramsey Model with Endogenous Markups (2010)
Working Paper: Non-Smooth Dynamics and Multiple Equilibria in a Cournt-Ramsey Model with Endogenous Markups (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:37:y:2013:i:11:p:2287-2306

DOI: 10.1016/j.jedc.2013.05.014

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