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Agricultural monopolistic competitor and the Pigovian tax

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  • Jablanovic, Vesna D.

Abstract

A monopolistically competitive agricultural market structure has some features of competition and some features of monopoly. Monopolistic competition has the following attributes: (a) many sellers; (b) product differentiation; and (c) free entry. In the long-run equilibrium, price equals average total cost, and the agricultural firm earns zero economic profit. The aim of this paper is to construct a relatively simple chaotic long-run monopolistic competitor’s agricultural output growth model that is capable of generating stable equilibria, cycles or chaos. A key hypothesis of this work is based on the idea that the coefficient plays a crucial role in explaining local stability of the monopolistic competitor’s agricultural output, where d is the coefficient of the marginal cost function of the agricultural monopolistic competitor; b is the coefficient of the inverse demand function; [] is the coefficient of average cost growth; m is the Pigovian tax rate; and e is the coefficient of the price elasticity of demand.

Suggested Citation

  • Jablanovic, Vesna D., 2013. "Agricultural monopolistic competitor and the Pigovian tax," Studies in Agricultural Economics, Research Institute for Agricultural Economics, vol. 115(1), pages 1-4, February.
    • Handle: RePEc:ags:stagec:146820
    DOI: 10.22004/ag.econ.146820
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    References listed on IDEAS

    as
    1. Richard H. Day, 1983. "The Emergence of Chaos from Classical Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 98(2), pages 201-213.
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    3. Jess Benhabib & Richard H. Day, 1981. "Rational Choice and Erratic Behaviour," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 48(3), pages 459-471.
    4. Grandmont, Jean-Michel, 1985. "On Endogenous Competitive Business Cycles," Econometrica, Econometric Society, vol. 53(5), pages 995-1045, September.
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