Strategic Investment and Endogenous Fluctuations

Inversión estratégica y fluctuaciones endógenas

Claude d'Aspremont, Rodolphe Dos Santos Ferreira and Louis-André Gérard-Varet

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Abstract: We study an overlapping generations multisectoral economy, where firms in each sector live two periods, strategically investing in the first and producing under Cournot competition in the second period. Equilibrium conditions for the two-stage games, and on the product, labor and capital markets, determine the number of active firms and result in a two-equation dynamic system. The possibility of robust endogenous fluctuations coming from strategic investment is demonstrated by contrast with a model without strategic investment and with free entry.

Date: 2015
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Published in Revue Economique, 2015, 66 (2), pp.351-368. ⟨10.3917/reco.662.0351⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00279591

DOI: 10.3917/reco.662.0351

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