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2 - Industrial Structure and the Macroeconomy: The Macroeconomic Model and Its Algebraic Framework

from Part One - Theory

Published online by Cambridge University Press:  07 December 2019

Marco Mazzoli
Affiliation:
Università degli Studi di Genova
Matteo Morini
Affiliation:
Università degli Studi di Torino, Italy
Pietro Terna
Affiliation:
Università degli Studi di Torino, Italy
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Summary

We describe the structure of the model, built plugging the entry/exit decisions into a macroeconomic system, by using a notion of statistical distribution of expectations that is consistent with the idea of rational expectations (at least in its original formulation) to model the entry decision of potential entrants. The theoretical framework is also useful to analyze, on a theoretical ground, the behavior of the firms’ markups over the cycle and is employed for the agent-based simulations. In particular, we model a macroeconomic system with oligopoly, entry/exit, and heterogeneous individuals. The algebraic framework of a new macro-model is analytically dissected, to prepare a sound basis for the experiments in simulation.

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Publisher: Cambridge University Press
Print publication year: 2019

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