Summary and appraisal

Abstract

Theoretical as well as empirical work in the field of industrial economics has delivered many important insights in firm behaviour under alternative market conditions. However, this work is overwhelmingly partial and does not consider economy-wide interdependence. On the other hand, AGE models focus on the modelling of interdependent markets and consequently indirect higher order effects are fully captured by them. Due to the very restrictive conditions of applicability, AGE models cannot effectively absorb important elements from the industrial economics literature. In attempting to bridge the gap between partial theories of the firm which are typical of industrial economics and applied general equilibrium modelling, this study has resulted in an operational microsimulation model for individual firms within a circular flow model. Dutch firms and the Dutch economy have served as case studies.