Market Cycles for a Non-Storable Product Under Adjustment Costs
AbstractWhen adjustment costs are present, cyclical preference and technology heterogeneities in a product’s markets induce cycles in production. We exploit cyclic and dihedral group invariances in an industry’s cost technology to describe these patterns. We show when equilibrium cyclical pricing and production patterns are ordered according to demand patterns. Our approach allows us to identify periods when prices may fall below unit costs, net of adjustment costs. Social welfare preferences over cyclical demand and supply heterogeneities are identified. We study the particulars of cycle dynamics when demand is linear and adjustment costs are quadratic. The analysis is developed for when external trade is impossible and when it is possible.
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Bibliographic InfoPaper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 12208.
Date of creation: 23 Oct 2004
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Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
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dihedral groups; production patterns; social welfare; external trade; group majorization;
Find related papers by JEL classification:
- E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
- C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General
- M20 - Business Administration and Business Economics; Marketing; Accounting - - Business Economics - - - General
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