Abstract
AbstractIn this paper, we address the determinants of the price of newly installed productive capacity. Specifically, we develop a differential game in which a competitive producer of consumption goods deals with a seller of capital goods endowed with market power. From a theoretical perspective, we demonstrate that an open‐loop Stackelberg equilibrium requires the producer of consumption goods to be more impatient than the seller of capital goods. Thereafter, we show that our theoretical setting can replicate the countercyclical pattern of the relative price of capital goods as well as its negative relationship with the investment–output ratio.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
