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A Critical Assessment of the Role of Imperfect Competition in Macroeconomics

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Market Behaviour and Macroeconomic Modelling

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Abstract

Models of imperfect competition have proliferated in the macroeconomics literature.1 These models have been used in both the business cycle literature, where the emphasis is on Keynesian type short-run movements in output, and in the growth literature, where long run properties of the economy are analyzed. These models involve firms having market power whereby a firm can profitably set price above marginal cost. Although these models have improved and made more realistic our understanding of certain economic forces, I claim that it is too much to expect these models based solely on market power to provide fundamentally new insights into how an economy works and that there are probably better areas to pursue to look for new insights into macroeconomics.2

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Authors
  1. Dennis W. Carlton
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Editors and Affiliations

  1. University of Groningen, The Netherlands

    Steven Brakman (Associate Professor), Hans van Ees (Professor of Economic Theory and Economic Education) & Simon K. Kuipers (Professor of Macroeconomic and Monetary Theory) (Associate Professor),  (Professor of Economic Theory and Economic Education) &  (Professor of Macroeconomic and Monetary Theory)

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© 1998 Palgrave Macmillan, a division of Macmillan Publishers Limited

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Carlton, D.W. (1998). A Critical Assessment of the Role of Imperfect Competition in Macroeconomics. In: Brakman, S., van Ees, H., Kuipers, S.K. (eds) Market Behaviour and Macroeconomic Modelling. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-26732-3_3

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