From Sunspots to Black Holes: Singular dynamics in macroeconomic models : model with endogenous markups

Brito, Paulo; Costa, Luis F.; Dixon, Huw

http://hdl.handle.net/10400.5/30458

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Authors

Brito, Paulo

Costa, Luis F.

Dixon, Huw

Abstract(s)

We develop a simple Ramsey model with numerous Cournotian industries where entry generates an endogenous markup. The model produces two different regimes: a monopoly and an oligopoly one. We provide a rigorous study of non-smooth dynamics and we also analyse the global dynamics of the model, demonstrating the model exhibits robust heteroclinic orbits, either of the smooth or the non-smooth type. Similar economies may be in any of these regimes and they may change regime along its convergence path. Fixed costs and elasticities of demand, play a crucial role and changing their values may alter the dynamics in a radical way, either by inducing a discontinuous transition or a discontinuous hysteresis.

Keywords

Endogenous Mark-Ups Non-Smooth Dynamics Discontinuous Induced Bifurcations Heteroclinic Orbit

URI

http://hdl.handle.net/10400.5/30458

Citation

Brito, Paulo; Luis F. Costa and Huw Dixon .(2008). “From Sunspots to Black Holes: Singular dynamics in macroeconomic models : model with endogenous markups”, Cardiff Business School , Working Paper No. E2008/21. (Search PDF in 2024)