Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/150137
Authors: 
Cho, In-Koo
Meyn, Sean P.
Year of Publication: 
2010
Citation: 
[Journal:] Theoretical Economics [ISSN:] 1555-7561 [Volume:] 5 [Year:] 2010 [Issue:] 2 [Pages:] 215-239
Abstract: 
This paper examines a dynamic general equilibrium model with supply friction. With or without friction, the competitive equilibrium is efficient. Without friction, the market price is completely determined by the marginal production cost. If friction is present, no matter how small, then the market price fluctuates between zero and the "choke-up" price, without any tendency to converge to the marginal production cost, exhibiting considerable volatility. The distribution of the gains from trading in an efficient allocation may be skewed in favor of the supplier, although every player in the market is a price taker.
Subjects: 
Dynamic general equilibrium model with supply friction
choke-up price
marginal production cost
welfare theorems
JEL: 
D41
D51
Persistent Identifier of the first edition: 
Creative Commons License: 
https://creativecommons.org/licenses/by-nc/3.0/
Document Type: 
Article

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