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GTAP Resources: Resource Display

GTAP Resource #7257

"Small group monopolistic competition in a GTAP model: meeting the Markusen challenge"
by Dixon, Peter and Maureen Rimmer


Abstract
Since the 1990s, there have been rapid increases in concentration ratios in many industries in the U.S., Australia and, we suspect, in other countries.

Despite this, applications of GTAP (the world’s most widely used global economic model) continue to be based on pure competition or Melitz-style Large-Group Monopolistic Competition (LGMC). In either case, all firms are small, there is free entry, and industries make zero pure profits.

Markusen challenges modellers to move to Small-Group Monopolistic Competition (SGMC) in which industries have high levels of concentration and firms are aware of the likely behaviour of their rivals.

We create a version of GTAP in which some industries are modelled as SGMC. We make two generalization of earlier Melitz-LGMC specifications.

First, we treat the perceived elasticity of demand by firms in SGMC industries as a variable. In our SGMC specification, mark-ups over marginal costs, which depend on perceived elasticities, fall when these elasticities are reduced by pro-competition policies.

Second, we allow for sticky adjustment of the number of firms in an industry, and simulate situations in which entry is blocked and incumbent firms make excess profits.


Resource Details (Export Citation) GTAP Keywords
Category: 2024 Conference Paper
Status: Not published
By/In: Presented during the 27th Annual Conference on Global Economic Analysis (Fort Collins, Colorado, USA)
Date: 2024
Version: 2
Created: Dixon, P. (4/14/2024)
Updated: Batta, G. (7/1/2024)
Visits: 143
- GTAP Data Base and extensions
- Non-competitive markets
- Bridging CGE and new quantitative trade (NQT) literature
- Model extension/development


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