Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/296461 
Year of Publication: 
2024
Citation: 
[Journal:] Theoretical Economics [ISSN:] 1555-7561 [Volume:] 19 [Issue:] 1 [Year:] 2024 [Pages:] 325-364
Publisher: 
The Econometric Society, New Haven, CT
Abstract: 
This paper studies the interplay between asset bubbles and product market competition. It offers two main insights. The first is that imperfect competition creates a wedge between interest rates and the marginal product of capital. This makes rational bubbles possible even when there is no overaccumulation of capital. The second is that, when providing a production subsidy, bubbles stimulate competition and reduce monopoly rents. I show that bubbles can destroy efficient investment and have ambiguous welfare consequences. However, when they stimulate competition, they can have crowding-in effects on capital.
Subjects: 
competition
market power
overaccumulation
Rational bubbles
JEL: 
E44
L13
L16
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc Logo
Document Type: 
Article

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