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Papers by Rodolphe Dos Santos Ferreira
Mathematical Social Sciences, 2015
ABSTRACT We study employment dynamics in an OLG model with unemployment benefits financed by taxi... more ABSTRACT We study employment dynamics in an OLG model with unemployment benefits financed by taxing wages, and with a defined contribution plan. The novelty with respect to recent studies of the effects of social security in this context is that we introduce a social norm to work, shaping the worker’s participation decision, and hence affecting the reservation wage. We find that a strong social norm to work destabilizes conventional wisdom by reversing the negative effects of social security on employment, and destabilizes the economy by facilitating the emergence of endogenous fluctuations.
Economie Publique Etudes Et Recherches, 2005
ABSTRACT The paper examines some issues linked to the integration of market power in general equi... more ABSTRACT The paper examines some issues linked to the integration of market power in general equilibrium. The first part reviews the different existing approaches: subjective and objective, in terms of quantities and in terms of prices. The second part presents a semi-competitive model, based on a sector by sector approach and a general notion of price coordination.
Oxford Economic Papers, 1989
Economies with strategic competitive environments are prone to ine cient sunspot-driven uctuatio... more Economies with strategic competitive environments are prone to ine cient sunspot-driven uctuations triggered by autonomous changes in rms' equilibrium conjectures. We show that a well designed taxation-subsidization scheme can eliminate these uctuations by imposing coordination on an e cient equilibrium. The particular taxation scheme we propose has the feature of distorting payo functions, rendering all laissez faire equilibrium congurations unsustainable except the ecient equilibrium, which is left una ected. Hence, it acts as a pure selection mechanism. In contrast to most sunspot-driven models in the literature, implementing this taxation scheme thus leads to signicant welfare gains. In our benchmark economy, these gains are equivalent to a 2 percent permanent increase in aggregate consumption. We decompose these gains into two components: a "pure stabilization e ect" and an "e cient stabilization e ect". We show that, from a quantitative point of view, most of the welfare gains result from the e cient stabilization e ect. This effect, while potentially important, is typically ignored in the traditional computations of the welfare costs of aggregate uctuations (e.g., .
Recherches économiques de Louvain
Annales d'économie et de statistique
Imperfect competition is a meaningful feature for macroeconomic analysis only to the extent that ... more Imperfect competition is a meaningful feature for macroeconomic analysis only to the extent that it leads to properties qualitatively different from those obtained under perfect competition. In particular, we have to wonder how imperfect competition per se may found an effective fiscal policy. For that matter we consider a simple overlapping generations model with firms acting as Cournot oligopolists in the good market. Through fiscal policy, a government, keeping the stock of money constant, redistributes wealth among generations and absorbs some of the output to provide public services. We show in this model that fiscal policy, by affecting firms' market power, can move the economy across perfect foresight stationary equilibria along a Pareto improving path, or that it can implement a full employment stationary equilibrium which Pareto-dominates underemployment equilibria.
Economies with oligopolistic markets are prone to inefficient sunspotdriven fluctuations due to s... more Economies with oligopolistic markets are prone to inefficient sunspotdriven fluctuations due to strategic interactions between firms. We show that a well designed taxation-subsidization scheme can eliminate these fluctuations by coordinating firms conjectures on an efficient equilibrium. The particular taxation scheme we propose has the feature of distorting payoff functions, making unsustainable all other equilibrium configurations under laissez faire, while leaving unaffected the efficient equilibrium. Hence, it acts as a pure selection mechanism. In contrast to most sunspot-driven models in the literature, implementing this taxation scheme thus leads to unambiguous welfare gains: not only are inefficient fluctuations in economic activity eliminated, but the economy is also stabilized on an efficient (second-best) production level.
Abstract In a simple temporary general equilibrium model, it is shown that, if the number of firm... more Abstract In a simple temporary general equilibrium model, it is shown that, if the number of firms is small, imperfect price competition in the markets for goods may be responsible for the existence of unemployment at any given positive wage. In our examples involving two ...
Competitive aggressiveness is analyzed in a simple spatial oligopolistic competition model, where... more Competitive aggressiveness is analyzed in a simple spatial oligopolistic competition model, where each one of two firms supplies two connected market segments, one captive the other contested. To begin with, firms are simply assumed to maximize profit subject to two constraints, one related to competitiveness, the other to market feasibility. The competitive aggressiveness of each firm, measured by the relative implicit price of the former constraint, is then endogenous and may be taken as a parameter to characterize the set of equilibria. A further step consists in supposing that competitive aggressiveness is controlled by each firm through its manager hiring decision, in a preliminary stage of a delegation game. When compe-
Competitive aggressiveness is analyzed in a simple spatial oligopolistic competition model, where... more Competitive aggressiveness is analyzed in a simple spatial oligopolistic competition model, where each one of two firms supplies two connected market segments, one captive the other contested. To begin with, firms are simply assumed to maximize profit subject to two constraints, one re- lated to competitiveness, the other to market feasibility. The competitive aggressiveness of each firm, measured by the
We examine two variants of the monopolistic competition model of Dixit and Stiglitz (1993). One i... more We examine two variants of the monopolistic competition model of Dixit and Stiglitz (1993). One is a simple general equilibrium model with n produced monopolistic goods and a numeraire good, the other in an "enlarged model", that includes labor time an an addiitonal good. In the case of alarge n, it is reasonable to consider in both variants only the direct effects of individual pricing decisions on demand, neglecting all indirect effects, either through the price index or through income. However, for other cases, we show that all these indirect effects can be taken into account and explicit solutions obtained. The derivations are even simpler for the enlarged model.
Free entry equilibria are usually determined by resorting to the zero profit condition. We plead ... more Free entry equilibria are usually determined by resorting to the zero profit condition. We plead instead for a strict application of the Nash equilibrium concept to a symmetric one-stage game played by actual and potential producers, who have a decreasing average cost function without sunk costs. Equilibrium then appears as typically indeterminate, with a number of active firms varying between an upper bound imposed by prof-itability and a lower bound required by sustainability. This indetermi-nacy may have significant macroeconomic implications, since it opens the way to coordination failures and to the emergence of endogenous fluctua-tions generated by the coordination process. The paper presents a general framework for the analysis of free entry equilibria, applies this framework to the standard regimes of price and quantity competition used in macro-economic modelling, and illustrates dynamic aggregate implications in a simple macroeconomic model. JEL classification number: D43,...
In Keynes' beauty contest, agents have to choose actions in accordance with an expected funda... more In Keynes' beauty contest, agents have to choose actions in accordance with an expected fundamental value and with the conventional value expected to be set by the market. In doing so, agents respond to a fundamental and to a coordination motive respectively, the prevalence of either motive being set exogenously. Our contribution is to consider whether agents favor the fundamental or the coordination motive as the result of a strategic choice that generates a strong strategic complementarity of agents' actions. We show that the coordination motive tends to prevail over the fundamental one, which yields a disconnection of activity away from the fundamental. A valuation game and a competition game are provided as illustrations of this general framework. Abstract In Keynes' beauty contest, agents have to choose actions in accordance with an ex-pected fundamental value and with the conventional value expected to be set by the market. In doing so, agents respond to a fundamen...
Mathematical Social Sciences, 2015
ABSTRACT We study employment dynamics in an OLG model with unemployment benefits financed by taxi... more ABSTRACT We study employment dynamics in an OLG model with unemployment benefits financed by taxing wages, and with a defined contribution plan. The novelty with respect to recent studies of the effects of social security in this context is that we introduce a social norm to work, shaping the worker’s participation decision, and hence affecting the reservation wage. We find that a strong social norm to work destabilizes conventional wisdom by reversing the negative effects of social security on employment, and destabilizes the economy by facilitating the emergence of endogenous fluctuations.
Economie Publique Etudes Et Recherches, 2005
ABSTRACT The paper examines some issues linked to the integration of market power in general equi... more ABSTRACT The paper examines some issues linked to the integration of market power in general equilibrium. The first part reviews the different existing approaches: subjective and objective, in terms of quantities and in terms of prices. The second part presents a semi-competitive model, based on a sector by sector approach and a general notion of price coordination.
Oxford Economic Papers, 1989
Economies with strategic competitive environments are prone to ine cient sunspot-driven uctuatio... more Economies with strategic competitive environments are prone to ine cient sunspot-driven uctuations triggered by autonomous changes in rms' equilibrium conjectures. We show that a well designed taxation-subsidization scheme can eliminate these uctuations by imposing coordination on an e cient equilibrium. The particular taxation scheme we propose has the feature of distorting payo functions, rendering all laissez faire equilibrium congurations unsustainable except the ecient equilibrium, which is left una ected. Hence, it acts as a pure selection mechanism. In contrast to most sunspot-driven models in the literature, implementing this taxation scheme thus leads to signicant welfare gains. In our benchmark economy, these gains are equivalent to a 2 percent permanent increase in aggregate consumption. We decompose these gains into two components: a "pure stabilization e ect" and an "e cient stabilization e ect". We show that, from a quantitative point of view, most of the welfare gains result from the e cient stabilization e ect. This effect, while potentially important, is typically ignored in the traditional computations of the welfare costs of aggregate uctuations (e.g., .
Recherches économiques de Louvain
Annales d'économie et de statistique
Imperfect competition is a meaningful feature for macroeconomic analysis only to the extent that ... more Imperfect competition is a meaningful feature for macroeconomic analysis only to the extent that it leads to properties qualitatively different from those obtained under perfect competition. In particular, we have to wonder how imperfect competition per se may found an effective fiscal policy. For that matter we consider a simple overlapping generations model with firms acting as Cournot oligopolists in the good market. Through fiscal policy, a government, keeping the stock of money constant, redistributes wealth among generations and absorbs some of the output to provide public services. We show in this model that fiscal policy, by affecting firms' market power, can move the economy across perfect foresight stationary equilibria along a Pareto improving path, or that it can implement a full employment stationary equilibrium which Pareto-dominates underemployment equilibria.
Economies with oligopolistic markets are prone to inefficient sunspotdriven fluctuations due to s... more Economies with oligopolistic markets are prone to inefficient sunspotdriven fluctuations due to strategic interactions between firms. We show that a well designed taxation-subsidization scheme can eliminate these fluctuations by coordinating firms conjectures on an efficient equilibrium. The particular taxation scheme we propose has the feature of distorting payoff functions, making unsustainable all other equilibrium configurations under laissez faire, while leaving unaffected the efficient equilibrium. Hence, it acts as a pure selection mechanism. In contrast to most sunspot-driven models in the literature, implementing this taxation scheme thus leads to unambiguous welfare gains: not only are inefficient fluctuations in economic activity eliminated, but the economy is also stabilized on an efficient (second-best) production level.
Abstract In a simple temporary general equilibrium model, it is shown that, if the number of firm... more Abstract In a simple temporary general equilibrium model, it is shown that, if the number of firms is small, imperfect price competition in the markets for goods may be responsible for the existence of unemployment at any given positive wage. In our examples involving two ...
Competitive aggressiveness is analyzed in a simple spatial oligopolistic competition model, where... more Competitive aggressiveness is analyzed in a simple spatial oligopolistic competition model, where each one of two firms supplies two connected market segments, one captive the other contested. To begin with, firms are simply assumed to maximize profit subject to two constraints, one related to competitiveness, the other to market feasibility. The competitive aggressiveness of each firm, measured by the relative implicit price of the former constraint, is then endogenous and may be taken as a parameter to characterize the set of equilibria. A further step consists in supposing that competitive aggressiveness is controlled by each firm through its manager hiring decision, in a preliminary stage of a delegation game. When compe-
Competitive aggressiveness is analyzed in a simple spatial oligopolistic competition model, where... more Competitive aggressiveness is analyzed in a simple spatial oligopolistic competition model, where each one of two firms supplies two connected market segments, one captive the other contested. To begin with, firms are simply assumed to maximize profit subject to two constraints, one re- lated to competitiveness, the other to market feasibility. The competitive aggressiveness of each firm, measured by the
We examine two variants of the monopolistic competition model of Dixit and Stiglitz (1993). One i... more We examine two variants of the monopolistic competition model of Dixit and Stiglitz (1993). One is a simple general equilibrium model with n produced monopolistic goods and a numeraire good, the other in an "enlarged model", that includes labor time an an addiitonal good. In the case of alarge n, it is reasonable to consider in both variants only the direct effects of individual pricing decisions on demand, neglecting all indirect effects, either through the price index or through income. However, for other cases, we show that all these indirect effects can be taken into account and explicit solutions obtained. The derivations are even simpler for the enlarged model.
Free entry equilibria are usually determined by resorting to the zero profit condition. We plead ... more Free entry equilibria are usually determined by resorting to the zero profit condition. We plead instead for a strict application of the Nash equilibrium concept to a symmetric one-stage game played by actual and potential producers, who have a decreasing average cost function without sunk costs. Equilibrium then appears as typically indeterminate, with a number of active firms varying between an upper bound imposed by prof-itability and a lower bound required by sustainability. This indetermi-nacy may have significant macroeconomic implications, since it opens the way to coordination failures and to the emergence of endogenous fluctua-tions generated by the coordination process. The paper presents a general framework for the analysis of free entry equilibria, applies this framework to the standard regimes of price and quantity competition used in macro-economic modelling, and illustrates dynamic aggregate implications in a simple macroeconomic model. JEL classification number: D43,...
In Keynes' beauty contest, agents have to choose actions in accordance with an expected funda... more In Keynes' beauty contest, agents have to choose actions in accordance with an expected fundamental value and with the conventional value expected to be set by the market. In doing so, agents respond to a fundamental and to a coordination motive respectively, the prevalence of either motive being set exogenously. Our contribution is to consider whether agents favor the fundamental or the coordination motive as the result of a strategic choice that generates a strong strategic complementarity of agents' actions. We show that the coordination motive tends to prevail over the fundamental one, which yields a disconnection of activity away from the fundamental. A valuation game and a competition game are provided as illustrations of this general framework. Abstract In Keynes' beauty contest, agents have to choose actions in accordance with an ex-pected fundamental value and with the conventional value expected to be set by the market. In doing so, agents respond to a fundamen...