Entry and the accumulation of capital: a two state-variable extension to the Ramsey model

Brito, Paulo and Dixon, Huw ORCID: https://orcid.org/0000-0002-9875-8965 2007. Entry and the accumulation of capital: a two state-variable extension to the Ramsey model. [Working Paper]. Cardiff Economics Working Papers, Cardiff: Cardiff University.

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Abstract

In this paper we consider the entry and exit of firms in a dynamic general equilibrium model with capital. At the firm level, there is a fixed cost combined with increasing marginal cost, which gives a standard U-shaped cost curve with optimal firm size. Entry is determined by a free entry condition such that the costs of entry are equal to the present value of incumbent firms, the cost of entry (exit) depends on the flow of entry (exit). Then equilibrium is saddle-point stable and the stable manifold is two-dimensional. Transitional dynamics can, under certain circumstances, be non-monotonic.

Item Type:	Monograph (Working Paper)
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics)
Subjects:	H Social Sciences > HB Economic Theory
Publisher:	Cardiff University
Date of First Compliant Deposit:	30 March 2016
Last Modified:	28 Oct 2022 10:18
URI:	https://orca.cardiff.ac.uk/id/eprint/77766

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