Open AccessStackelberg-Nash Equilibrium and Perfect Competition in the Solow-Uzawa Growth Model
Author(s) -
Wei-Bin Zhang
Publication year - 2022
Publication title -
lecturas de economia/lecturas de economía
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.137
H-Index - 6
eISSN - 2323-0622
pISSN - 0120-2596
DOI - 10.17533/udea.le.n96a342588
Subject(s) - stackelberg competition , duopoly , economics , imperfect competition , nash equilibrium , competition (biology) , growth model , microeconomics , mathematical economics , perfect competition , cournot competition , ecology , biology
This study introduces Stackelberg-Nash equilibrium to neoclassical growth theory. It attempts to make neoclassical economic growth theory more robust in modelling the complexity of market structures. The model is constructed within the framework of the Solow-Uzawa two-sector model. The economy is composed of two sectors. The final goods sector is the same as in the Solow one-sector growth model which is characterized by perfect competition. The consumer goods sector is the same as the consumer goods sector in the Uzawa model but is characterized by Stackelberg duopoly. We model household behavior with Zhang’s concept of disposable income and utility. The model endogenously determines profits of duopoly which are equally distributed among the homogeneous population. We build the model and then identify the existence of an equilibrium point through simulation. We conduct comparative static analyses of some parameters. We also compare the economic performance of the traditional Uzawa model and the model with the Stackelberg-Nash equilibrium. We conclude that the imperfect competition increases national output, national wealth, and utility level in comparison to perfect competition.