Capital Accumulation, Mergers, and the Ramsey Golden Rule
We take a differential game approach to model the Ramsey growth model from the standpoint of the representative firm. We identify parametric conditions such that the economy cannot reach the Ramsey golden rule, due to the presence of a stable demand-driven equilibrium. This may happen under Cournot and Bertrand behaviour, as well as social planning. We show that a wave of horizontal mergers can indeed drive the economy towards the Ramsey golden rule.
KeywordsSaddle Point Capital Accumulation Golden Rule Cournot Competition Social Planning
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