Endogenous Firms and Endogenous Business Cycles
AbstractThe paper is concerned with the implications of imperfect competition and endogenous determination of the number of firms for endogenous fluctuations in the simple overlapping generations model. If firms have market power on output markets and there is free entry, such that the number of firms is endogenous and variable, then two effects should be taken into account: the love of variety effect and the endogenous markup effect. Our main conclusions are: (i) both effects contribute positively to the occurrence of endogenous fluctuations around a single and unique steady state by relaxing the condition for cycles as compared to the condition in competitive models, and (ii) both effects contribute to create certain realistic features concerning the comovement of output, prices and wages over the endogenous cycle.
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Bibliographic InfoPaper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number 98-15.
Length: 22 pages
Date of creation: Sep 1998
Date of revision:
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More information through EDIRC
endogenous fluctuations; imperfect competition; endogenous firms; love of variety; endogenous markups;
Find related papers by JEL classification:
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
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