Productive Public Expenditure and Imperfect Competition with Endogenous Price Markup: Comment

ISEG/UTL Working Paper No. 24/2006/DE/UECE

8 Pages Posted: 20 Dec 2006

See all articles by Luís F. Costa

Luís F. Costa

ISEG - Lisbon School of Economics & Management of Universidade de Lisboa; REM - Research in Economics and Mathematics; UECE - Research Unit on Complexity and Economics

Nuno Palma

Northwestern University - Department of Economics

Date Written: October 2006

Abstract

In a recent article Chen et al. (2005) analyse the role of government expenditure in an imperfectly competitive static model, introducing a government-expenditure externality through the production function. Our purpose in the present paper is to argue that the claim from the authors that their model generates an endogenous markup is in our view incorrect. We argue that their model does not contain an endogenous markup, but a fixed one and that their claim is based upon an incorrect interpretation of what is the marginal cost in their own model.

Keywords: Endogenous markup

JEL Classification: E12, E62, H54

Suggested Citation

Costa, Luís Filipe Pereira da and Palma, Nuno, Productive Public Expenditure and Imperfect Competition with Endogenous Price Markup: Comment (October 2006). ISEG/UTL Working Paper No. 24/2006/DE/UECE, Available at SSRN: https://ssrn.com/abstract=952373 or http://dx.doi.org/10.2139/ssrn.952373

Luís Filipe Pereira da Costa (Contact Author)

ISEG - Lisbon School of Economics & Management of Universidade de Lisboa ( email )

Rua do Quelhas, 6
Lisboa, 1200-781
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+351 213 925 981 (Phone)
+351 213 922 808 (Fax)

HOME PAGE: http://https://www.iseg.ulisboa.pt/faculty/luis-costa/

REM - Research in Economics and Mathematics ( email )

ISEG, Universidade de Lisboa
Rua Miguel Lupi, 20
Lisboa, 1249-078
Portugal

HOME PAGE: http://https://www.iseg.ulisboa.pt/faculty/luis-costa/

UECE - Research Unit on Complexity and Economics

ISEG, U. Lisboa
Rua Miguel Lupi, 20
Lisboa, 1249-078
Portugal
+351-213 925 912 (Phone)
+351-213 971 196 (Fax)

HOME PAGE: http://https://uece.rc.iseg.ulisboa.pt/

Nuno Palma

Northwestern University - Department of Economics ( email )

2003 Sheridan Road
Evanston, IL 60208
United States

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