Delli Gatti, D;
Gallegati, M;
Palestrini, A;
Tedeschi, G;
Vidal-Tomás, D;
(2024)
Market power, technical progress and financial fragility.
Journal of Economic Behavior and Organization
, 217
pp. 435-452.
10.1016/j.jebo.2023.10.037.
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Abstract
We explore the nexus of market power, innovation and financial fragility by means of a macroeconomic agent based model whose core is the Dixit-Greenwald-Stiglitz (DGS) theory of firm behaviour, which nests the Greenwald-Stiglitz characterization of the firm as a borrower that runs the risk of bankruptcy in the Dixit-Stiglitz monopolistic competition setting. The optimal firm's size is increasing with net worth and productivity. Net worth increases with profits while productivity increases through R&D and innovation. Simulations show that in the presence of market power firms are more innovative and financially robust and less prone to bankruptcy. These features have not surfaced so far in standard characterizations of monopolistic competition.
| Type: | Article |
|---|---|
| Title: | Market power, technical progress and financial fragility |
| DOI: | 10.1016/j.jebo.2023.10.037 |
| Publisher version: | https://doi.org/10.1016/j.jebo.2023.10.037 |
| Language: | English |
| Additional information: | This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions. |
| Keywords: | Market power, Net worth, Productivity, Debt relief |
| UCL classification: | UCL UCL > Provost and Vice Provost Offices > UCL BEAMS UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science > Dept of Computer Science |
| URI: | https://discovery.ucl.ac.uk/id/eprint/10186528 |
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