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 (licandro.omar@gmail.com)

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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