CORE DP 2026 / 03

Oligopolistic output markets / Claude d'Aspremont, Rodolphe Dos Santos Ferreira 

> The overwhelming majority of macroeconomic models uses the assumption that output markets are perfectly competitive or else monopolistically competitive, in either case that output is supplied by insignificant firms, producing at a scale that is negligible when compared to the size of their respective markets. This view contrasts with the one prevailing in the 1930s, the period of formation of macroeconomic theory as an autonomous field (section 1). It is also in discrepancy with the simple observation of economies nowadays populated by large firms, some of them "superstars" (section 2). So, this view exhibits a problematic resilience that cannot be fully explained by the conceptual and analytic simplicity it allows. Indeed, the Dixit and Stiglitz (1977) general equilibrium model at the basis of New Keynesian macroeconomics can be straightforwardly adapted to a context of large firms while keeping much of its tractability (section 3). And it is easy to show that moving to such context of oligopolistic industries has serious implications for the analysis of major macroeconomic phenomena, like unemployment, or fluctuations and growth (section 4).