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https://doi.org/10.1006/jeth.1994.1019

has been cited by the following article:

• TITLE: Capital Market Power and Economic Growth in an Overlapping-Generations Model with Rational Expectations

  AUTHORS: Paul Ritschel

  KEYWORDS: Overlapping Generations, Market Power, Imperfect Competition, Economic Growth, Endogenous Fluctuations

  JOURNAL NAME: Theoretical Economics Letters, Vol.13 No.5, October 12, 2023

  ABSTRACT: This paper investigates how market power of agents in the capital market affects economic growth and output fluctuations in an overlapping-generations model with endogenous capital accumulation. Agents interact strategically by anticipating the influence of their savings behavior on the equilibrium return on capital. We demonstrate that imperfect competition reduces economic growth because agents under-save relative to the competitive benchmark. Moreover, it is shown that there exists a uniquely determined Nash-equilibrium trajectory of the economy. However, this trajectory may be non-monotonic and thus differ qualitatively from the perfect-foresight trajectory in the case of perfect competition. Competitive limits can be recovered through population growth. These findings imply that competition in the capital market is an important driver of strong and smooth economic growth.