Year: 2024
Type: article
Abstract: In this paper, we address the determinants of the price of newly installed productive capacity. Specifically, we develop a differential game in which a competitive producer of consumption goods deals with a seller of capital goods endowed with market power. From a theoretical perspective, we demonstrate that an open‐loop Stackelberg equilibrium requires the producer of consumption goods to be more impatient than the seller of capital goods. Thereafter, we show that our theoretical setting can replicate the countercyclical pattern of the relative price of capital goods as well as its negative relationship with the investment–output ratio.
DOI: 10.1002/mde.4370
Authors: Marco Guerrazzi, Giuseppe Candido
Institution: University of Genoa
Language: English
Topic: Economic theories and models
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: hybrid
Estimated APC paid: $2,970
OpenAlex ID: W4401712503