Introducing Imperfect Competition in CGE Models:Technical Aspects and Implications

Roberto Roson

No 2006_02, Working Papers from Department of Economics, University of Venice "Ca' Foscari"

Abstract: This paper considers the technical aspects and the consequences, in terms of simulation results and policy assessment, of introducing imperfect competition in a CGE model. The modifications to the standard CGE framework needed to model imperfect competition in some industries are briefly discussed. Next, the paper examines whether, how much and why, those changes may affect the qualitative output a typical simulation experiment. It is argued that technical choices made in designing the model structure may have a significant impact on the model behavior. This is especially evident when the model output of an imperfect competition closure is compared with the one of a standard closure, assuming perfect competition. As an illustration, a simulation of agricultural trade liberalization is analyzed. Results from the same simulation exercise, but produced by alternative model formulations (one standard competitive and three imperfect competition variants) are presented and discussed. It is found that having imperfect competition in a CGE model does matter in terms of simulation results. Furthermore, alternative formulations of imperfect competition typically bring about quite different findings and implications.

Keywords: Computable General Equilibrium Models; Imperfect Competition; Oligopolistic Models; Economies of Scale; Empirical Industrial Organization; Agriculture; Trade Liberalization; Trade Policy. (search for similar items in EconPapers)
JEL-codes: D58 F12 L16 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Related works:
Journal Article: Introducing Imperfect Competition in CGE Models: Technical Aspects and Implications (2006)
Working Paper: Introducing Imperfect Competition in CGE Models: Technical Aspects and Implications (2006)
Working Paper: Introducing Imperfect Competition in CGE Models: Technical Aspects and Implications (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:ven:wpaper:2006_02

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