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Christian-Albrechts-Universität zu Kiel

Institut für Volkswirtschaftslehre - Department of Economics
Economics Working Papers

Economics Working Papers: Abstract 2008-10


Nummer

2008-10

Autoren

Simone Alfarano, Mishael Milakovic, Albrecht Irle, Jonas Kauschke

 

Titel

 

A Statistical Equilibrium Model of Competitive Firms
Abstract We argue that the complex interactions of competitive heterogeneous firms lead to a statistical equilibrium distribution of firms’ profit rates, which turns out to be an exponential power (or Subbotin) distribution. Moreover, we construct a diffusion process that has the Subbotin distribution as its stationary probability density, leading to a phenomenologically inspired interpretation of variations in the shape parameter of the statistical equilibrium distribution. Our main finding is that firms’ idiosyncratic efforts and the tendency for competition to equalize profit rates are two sides of the same coin.

Keywords: Statistical equilibrium, maximum entropy principle, diffusion process, stochastic differential equation, competition, profit rate, return on assets, Subbotin distribution, Laplace distribution

JEL classification: C16, L10, D21, E10

 

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