Interpreting Markups in Spanish Manufacturing: The Exponential Model
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In this paper, we present a model of oligopolistic competition where demand functions are exponential. We show that in such a model there is a unique Cournot equilibrium. This model predicts a monotonic relationship between the markup of a firm and its output. We present evidence, based on a sample of Spanish manufacturing firms, that this relationship is inverse.
KeywordsNash Equilibrium Order Condition Exponential Model Profit Maximization Representative Consumer
We thank Cesar Alonso, Carmen Beviá, Luis Cabral, Rosario Crino, Manuel Domínguez, Natalia Fabra, Philippe Gaignepain, Miguel Gonzalez-Maestre, Paco Marhuenda, Pierre von Mouche, Philipp Schmidt-Dengler, José María Sastre, Galina Zudenkova, an anonymous referee and participants in seminars at U. Carlos III, U. Complutense, Madrid, IEB U. of Barcelona, the 2011 EARIE meeting and the Jornadas de Economia Industrial 2011 for very helpful comments, Diego Rodríguez for programming support and María Hernández for research assistance. The first author acknowledges financial support from ECO2011-25330. The second author acknowledges financial support from ECO2010-19847.
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