Investment-Goods Market Power and Capital Accumulation

,, Andrea Lanteri and Alessandro Villa
Authors registered in the RePEc Author Service: Fabio Bertolotti

No 19099, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We develop a model of capital accumulation in an economy that sources investment goods from large firms with market power. We model investment-goods producers as a dynamic oligopoly and characterize the equilibrium with a dynamic markup rule. The markup on investment goods acts as an endogenous adjustment cost, which decreases as the economy grows but permanently distorts the steady state. We calibrate the model to simulate the post-2020 shocks to demand for semiconductors. The calibrated model attributes the observed increase in the price of equipment mainly to increasing marginal costs and to a smaller extent to increasing markups.

Keywords: investment; Dynamic oligopoly; Semiconductors (search for similar items in EconPapers)
JEL-codes: E22 E32 (search for similar items in EconPapers)
Date: 2024-05
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Working Paper: Investment-Goods Market Power and Capital Accumulation (2024)
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