Equilibrium with Constant Returns

Privately Owned

This chapter analyzes an equilibrium model where privately owned firms feature either smooth decreasing or constant returns to scale. Profit of the constant returns to scale firms being equal to zero at equilibrium, the equilibrium of the model does not depend on the ownership structure of these firms. In addition, the convex conical production sets of these firms sum up into a convex cone. It is as if the production sector operating under constant returns consists of a unique firm. The general equilibrium model with decreasing and constant returns to scale firms is essentially the same model as the one considered in Chapter 10 with the addition of a unique firm operating under constant returns to scale. Nevertheless, this addition is enough to hamstring the approach of the preceding chapters based on the concept of price system that equates aggregate supply and demand. The solution is to add to that price system the activity of the constant returns to scale firm.

ASSET PRICING IN DYNAMIC STOCHASTIC GENERAL EQUILIBRIUM MODELS WITH INDETERMINACY

Macroeconomic Dynamics ◽

10.1017/s1365100507060373 ◽

2007 ◽

Vol 12 (1) ◽

pp. 50-71 ◽

Author(s):

NATALIA GERSHUN ◽

SHARON G. HARRISON

Keyword(s):

Asset Pricing ◽

General Equilibrium ◽

Returns To Scale ◽

Dynamic Stochastic General Equilibrium ◽

Increasing Returns ◽

Dsge Model ◽

Increasing Returns To Scale ◽

Local Indeterminacy ◽

Dynamic Stochastic ◽

The One

We explore asset pricing in the context of the one-sector Benhabib-Farmer-Guo (BFG) model with increasing returns to scale in production and compare our results with financial implications of the standard dynamic stochastic general equilibrium (DSGE) model. Our main goal is to determine the effects of local indeterminacy and the presence of sunspot shocks on asset pricing. We find that the BFG model does not adequately represent key stylized facts of U.S. capital markets and does not improve on the asset-pricing results obtained in the standard DSGE model.

Inputs Price Transmission Effect on Marketing Margins on Fisheries Products of Iran

Modern Applied Science ◽

10.5539/mas.v10n1p184 ◽

2015 ◽

Vol 10 (1) ◽

pp. 184

Author(s):

Mahdi Saravani ◽

Nazar Dahmarde Ghaleno

Keyword(s):

Cold Water ◽

Returns To Scale ◽

Sufficient Conditions ◽

Price Transmission ◽

Labor Costs ◽

Marketing Costs ◽

The One ◽

Necessary And Sufficient ◽

Marketing Margins ◽

Volatility and instability of inputs price and products on the one hand and high marketing margins, on the other hand are the main characters of inefficient marketing of agricultural products. So in this paper we will consider the Prices Transmission of Inputs and Marketing Costs on Marketing Margin of Fisheries Products during 2004 to 2014. The variables examined in this study which were extracted from the website of Fisheries and Statistics Center of Iran, include hot and cold water fish prices (Larve and Fingerling), Fishmeal and Concentrate (inputs), transport and labor costs and amount of used inputs. The results show that Necessary and sufficient conditions for coincidence of inputs price transmission has rejected and mediators through asymmetrical transmission of input prices to retails increase marketing margin and thereby earn profits. The coincident test also in the transfer of marketing costs showed asymmetry coincidence of marketing costs. The variable of total amount of inputs that is considered as an explanatory variable to ensure assume constant returns to scale in marketing margin model, Its impact on marketing margins is incremental and statistically significant. The process trend variable coefficient also shows that market margins will increase over time. To improve this situation it is suggested to establish the Notification institutions of market.

Determining the Toll and Capacity of a Highway to Be Constructed in Parallel with Subway

Mathematical Problems in Engineering ◽

10.1155/2014/721273 ◽

2014 ◽

Vol 2014 ◽

pp. 1-9

Author(s):

Wen-Xiang Wu ◽

Hua-Yan Shang

Keyword(s):

Returns To Scale ◽

Road Construction ◽

Economic Conditions ◽

Net Benefit ◽

Transit Network ◽

Capacity Choice ◽

Publicly Owned ◽

Privately Owned

This paper considers the problem of toll and capacity choice of a new highway with a bottleneck added onto an existing transit network under four ownership/tolling regimes: public fine toll, public flat toll, private fine toll, and private flat toll. Whenever fine toll and flat toll are imposed, in a competitive highway/transit network with constant returns to scale in road construction, an optimally designed and priced privately owned highway would produce positive net benefit justly equal to the total markup with respect to all autocommuters, whereas an optimally designed and priced publicly owned highway would lead to a deficit; that is, the toll revenues are insufficient to cover its all costs. The economic conditions to invest a new road are investigated under different ownership/tolling regimes.

Very Simple Mathematical Model of MMT (Modern Monetary Theory)

Business and Economic Research ◽

10.5296/ber.v11i3.18983 ◽

2021 ◽

Vol 11 (3) ◽

pp. 78

Author(s):

Yasuhito Tanaka

Keyword(s):

Technological Progress ◽

Budget Deficit ◽

Full Employment ◽

Returns To Scale ◽

Perfect Competition ◽

Monetary Theory ◽

Budget Deficits ◽

Growing Economy ◽

The One ◽

The purpose of this paper is to provide a concise theoretical and mathematical foundation for the major parts of the debate in the recently discussed school of economics called Modern Monetary Theory (MMT), while maintaining the basics of the neoclassical microeconomic framework, such as utility maximization of consumers using budget constraints and utility functions, and equilibrium of demand and supply of goods under perfect competition with constant returns to scale technology. By a two-periods overlapping generations (OLG) model in which the economy grows by technological progress, we will show that: 1) We need a budget deficit to achieve full employment with constant price when the economy grows by technological progress. This budget deficit should not be offset by future surplus; 2) A budget deficit that exceeds the level necessary to maintain full employment in a growing economy with constant price will cause inflation. A stable budget deficit is required to prevent further inflation; 3) A budget deficit that is insufficient to maintain full employment will cause a recession with involuntary unemployment. A budget deficit larger than the one necessary and sufficient to maintain full employment without a recession can overcome a recession caused by insufficient budget deficit and restore full employment. The deficit created to overcome the recession should not be offset by subsequent surpluses, since full employment can then be maintained through constant budget deficits.

General Equilibrium Theory of Value

10.23943/princeton/9780691146799.001.0001 ◽

2011 ◽

Author(s):

Yves Balasko

Keyword(s):

Economic Theory ◽

General Equilibrium ◽

Equilibrium Model ◽

Supply And Demand ◽

General Equilibrium Model ◽

Standard Theory ◽

Equilibrium Solutions ◽

General Equilibrium Theory ◽

Multiple Markets ◽

Theory Of Value

The concept of general equilibrium, one of the central components of economic theory, explains the behavior of supply, demand, and prices by showing that supply and demand exist in balance through pricing mechanisms. The mathematical tools and properties for this theory have developed over time to accommodate and incorporate developments in economic theory, from multiple markets and economic agents to theories of production. This book offers an extensive, up-to-date look at the standard theory of general equilibrium, to which the author has been a major contributor. This book explains how the equilibrium manifold approach can be usefully applied to the general equilibrium model, from basic consumer theory and exchange economies to models with private ownership of production. The book examines properties of the standard general equilibrium model that are beyond traditional existence and optimality. It applies the theory of smooth manifolds and mappings to the multiplicity of equilibrium solutions and related discontinuities of market prices. The economic concepts and differential topology methods presented in this book are accessible, clear, and relevant, and no prior knowledge of economic theory is necessary. The book offers a comprehensive foundation for the most current models of economic theory and is ideally suited for graduate economics students, advanced undergraduates in mathematics, and researchers in the field.

SUNSPOTS AND CREDIT FRICTIONS

Macroeconomic Dynamics ◽

10.1017/s1365100511000836 ◽

2012 ◽

Vol 17 (5) ◽

pp. 1055-1069 ◽

Cited By ~ 12

Author(s):

Sharon G. Harrison ◽

Mark Weder

Keyword(s):

Business Cycles ◽

General Equilibrium ◽

Utility Function ◽

Equilibrium Model ◽

Returns To Scale ◽

Increasing Returns ◽

Increasing Returns To Scale ◽

Collateral Constraints ◽

Collateral Constraint ◽

Credit Frictions

We examine a general equilibrium model with collateral constraints and increasing returns to scale in production. The utility function is nonseparable, with no income effect on the consumer's choice of leisure. Unlike this model without a collateral constraint, we find that indeterminacy of equilibria is possible. Hence, business cycles can be driven by self-fulfilling expectations. This is the case for more realistic parameterizations than in previous, similar models without these features.

The Cobb-Douglas function for a continuum model

Cuadernos de Economía ◽

10.15446/cuad.econ.v36n70.49052 ◽

2017 ◽

Vol 36 (70) ◽

pp. 1-18 ◽

Author(s):

Javier Humberto Ospina Holguín

Keyword(s):

Continuum Model ◽

Returns To Scale ◽

Profit Maximization ◽

Functional Derivative ◽

Maximization Problem ◽

Constant Elasticity ◽

Constant Elasticity Of Substitution ◽

Competitive Firm ◽

The One ◽

This paper introduces two formal equivalent definitions of the Cobb-Douglas function for a continuum model based on a generalization of the Constant Elasticity of Substitution (CES) function for a continuum under not necessarily constant returns to scale and based on principles of product calculus. New properties are developed, and to illustrate the potential of using the product integral and its functional derivative, it is shown how the profit maximization problem of a single competitive firm using a continuum of factors of production can be solved in a manner that is completely analogous to the one used in the discrete case.

Handbook of Research on Strategic Developments and Regulatory Practice in Global Finance - Advances in Finance, Accounting, and Economics ◽

Evaluation of Branch-Based Efficiency in Turkish Deposit Banks

10.4018/978-1-4666-7288-8.ch005 ◽

2015 ◽

pp. 64-74 ◽

Author(s):

Ümit Hacıoğlu ◽

Hasan Dinçer ◽

Özlem Olgu

Keyword(s):

Data Envelopment Analysis ◽

Banking Sector ◽

Returns To Scale ◽

Scale Model ◽

Data Envelopment ◽

Bank Branch ◽

Empirical Results ◽

Efficiency Performance ◽

Privately Owned

The aim of the chapter is to measure the non-interest income based branch efficiency among privately-owned banks in the Turkish banking sector between 2008 and 2012. The chapter is built on the three inputs and three outputs model of bank branch efficiency and empirical results are constructed with the data envelopment analysis (DEA) in the limitation of input-orientated constant returns to scale model. The results demonstrate that all privately-owned banks improve non-interest based efficiency performance by the years and mean efficiency in the sector regularly rises due to the increasing overall competitive factors.

The Productive Efficiency of Science and Technology Worldwide: A Frontier Analysis

Journal on Efficiency and Responsibility in Education and Science ◽

10.7160/eriesj.2021.140402 ◽

2021 ◽

Vol 14 (4) ◽

pp. 217-230

Author(s):

Gustavo Ferro ◽

Carlos A. Romero

Keyword(s):

Returns To Scale ◽

Productive Efficiency ◽

Data Envelopment ◽

Codified Knowledge ◽

Frontier Analysis ◽

Small Countries ◽

Dea Efficiency ◽

The One ◽

Patented Inventions

We are interested in how codified knowledge is produced around the globe (which inputs are used to produce scientific articles and patented inventions) and the efficiency of the process (how do the best performers produce more with the same inputs or produce the same with less inputs). Using a Data Envelopment Analysis (DEA) efficiency frontier approach, we aim to determine which countries are more efficient at producing codified knowledge. We proxy knowledge production by publications and patents, obtained through human (researchers) and non-human (R&D expenditure) resources. We built a 15-year database with more than 800 observations of these and other variables. Our findings enable us to distinguish efficiency by country, geographical region, and income area. We run four different specifications and correlate the results with partial productivity indexes seeking consistency. Under constant returns to scale, the most traditional producers of knowledge are not fully efficient. Instead, small countries with limited resources appear to be efficient. When we add environmental conditions, both sets of countries are efficient producers of knowledge outputs. High-income regions, on the one hand, and East Asia, North America, and Europe and Central Asia, on the other, are the most efficient regions at producing knowledge.

General Equilibrium Oligopoly and Ownership Structure

Econometrica ◽

10.3982/ecta17906 ◽

2021 ◽

Vol 89 (3) ◽

pp. 999-1048

Author(s):

José Azar ◽

Xavier Vives

Keyword(s):

General Equilibrium ◽

Ownership Structure ◽

Returns To Scale ◽

Weighted Average ◽

Elasticity Of Substitution ◽

Real Wages ◽

Ownership Structures ◽

Pecuniary Externality ◽

Common Ownership ◽

We develop a tractable general equilibrium framework in which firms are large and have market power with respect to both products and labor, and in which a firm's decisions are affected by its ownership structure. We characterize the Cournot–Walras equilibrium of an economy where each firm maximizes a share‐weighted average of shareholder utilities—rendering the equilibrium independent of price normalization. In a one‐sector economy, if returns to scale are non‐increasing, then an increase in “effective” market concentration (which accounts for common ownership) leads to declines in employment, real wages, and the labor share. Yet when there are multiple sectors, due to an intersectoral pecuniary externality, an increase in common ownership could stimulate the economy when the elasticity of labor supply is high relative to the elasticity of substitution in product markets. We characterize for which ownership structures the monopolistically competitive limit or an oligopolistic one is attained as the number of sectors in the economy increases. When firms have heterogeneous constant returns to scale technologies, we find that an increase in common ownership leads to markets that are more concentrated.