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Aggregate demand externalities, intermediate inputs and multiple equilibria

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We show that the presence of intermediate inputs magnifies the multiplier effects of pecuniary aggregate demand externalities in an imperfectly competitive model. In our setting, the presence of intermediate inputs is a necessary condition for the existence of multiple equilibria. Moreover, the range of parameter values for which multiple equilibria are possible is increasing in the share of intermediate inputs

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en

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application/pdf

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http://flora.insead.edu/fichiersti_wp/Inseadwp1995/95-67.pdf

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Copyright INSEAD. All rights reserved