Market power, the multiplier and economic policy under oligopolistic competition

In this note, we consider a multisector macroeconomic model under oligopolistic competition. We analyze the effect of an increase of the number of sectors on equilibrium price and on allocations, when the number of oligopolits of each type is constant. We also show that a tax policy has more impact on aggregate activity when the economy has many sectors. Additionally, the tax multiplier is higher than the expenditure multiplier. This note is a macroeconomic piece of a more general research devoted to cooperation and coordination failures under strategic interactions.