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The aggregate Le Chatelier Samuelson principle with Cournot competition

By Bertrand Koebel and François Laisney

Abstract

This paper studies the aggregate substitution and expansion effects triggered by changes in input prices, in a context where firms supply a homogenous commodity and compete in quantities à la Cournot. We derive a sufficient condition for the existence of a Cournot equilibrium and show that this condition also ensures that the Le Chatelier-Samuelson principle is likely to be satisfied in the aggregate at the Cournot equilibrium, although it may not be satisfied at the firm level. These results are confirmed by the empirical findings obtained for two-digit US manufacturing industries, which also highlight the importance of imperfect competition for understanding aggregate growth, investment and employment

Topics: 330 Wirtschaft
Year: 2010
OAI identifier: oai:ub-madoc.bib.uni-mannheim.de:2880

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