Bertrand-Edgeworth equilibrium in a cash-in-advance economy |
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Authors: | Basci Erdem; Saglam Ismail |
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Institution: | Department of Economics, Bilkent University, Bilkent, Ankara 06533, Turkey; e-mail: basci{at}bilkent.edu.tr
Department of Economics, Bogazici University, Bebek, Istanbul 34342, Turkey; e-mail: saglamis{at}boun.edu.tr |
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Abstract: | This paper is about price and wage competition in a dynamicgeneral equilibrium model. We consider an equity financed economywhere firms need money to finance their input costs. Part ofthe output is sold for money to be used in the next period asworking capital and the remaining part is distributed to ownersas real dividends. We first characterize the steady state competitiveequilibrium path. Second, we study whether this competitiveequilibrium can be supported as a pure strategy Nash equilibriumin price and wage setting games. We prove a positive resultfor price competition and a negative one for wage competition. |
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