When 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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Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number
12208.
Length: Date of creation: 23 Oct 2004 Date of revision: Handle: RePEc:isu:genres:12208
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Find related papers by JEL classification: C6 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming E2 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment M2 - Business Administration and Business Economics; Marketing; Accounting - - Business Economics
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Kiminori Matsuyama, 1996.
"Growing Through Cycles,"
Discussion Papers
1203, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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