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ERIC Number: EJ1217374
Record Type: Journal
Publication Date: 2019
Pages: 13
Abstractor: As Provided
ISSN: ISSN-0022-0485
Equilibrium with Capacity-Constrained Firms: A Classroom Experiment
Barseghyan, Gayane; Grigoryan, Aram
Journal of Economic Education, v50 n2 p129-141 2019
The authors develop a two-stage classroom experiment to illustrate convergence to long-run equilibrium in a market where price-taking firms are capacity-constrained. Once equilibrium in the first stage is established, capacity constraints are introduced by imposing discontinuities in the fixed costs of several firms. The experiment demonstrates that this supply shock yields a higher market price and, under assumed parameterization, several higher-cost firms that otherwise are not able to survive in the long-run equilibrium enter the market and earn positive profits.
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Publication Type: Journal Articles; Reports - Research
Education Level: Higher Education; Postsecondary Education
Audience: N/A
Language: English
Sponsor: N/A
Authoring Institution: N/A
Identifiers - Location: Armenia