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Real Business Cycles with Cournot Competition and Endogenous Entry

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  • Colciago, Andrea
  • Etro, Federico

Abstract

We introduce Cournot competition and endogenous entry in an otherwise neoclassical macroeconomic framework. First, we develop a model with exogenous savings à la Solow describing the dynamic path of business creation. Then, we develop a model à la Ramsey describing the dynamic interaction of consumption and business creation. Our models are able to explain why markups vary countercylically and profits are procyclical. The analysis of permanent and temporary technology and preference shocks and of the second moments suggests that our model can outperform the Real Business Cycle framework in many dimensions.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 7326.

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Date of creation: 30 Sep 2007
Date of revision: 25 Feb 2008
Handle: RePEc:pra:mprapa:7326

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Keywords: Business Cycle; Cournot Competition; Endogenous Entry;

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References

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  1. Etro, Federico, 2008. "Growth leaders," Journal of Macroeconomics, Elsevier, vol. 30(3), pages 1148-1172, September.
  2. Christian Broda & David E. Weinstein, 2010. "Product Creation and Destruction: Evidence and Price Implications," American Economic Review, American Economic Association, vol. 100(3), pages 691-723, June.
  3. Federico Etro & Andrea Colciago, 2007. "Endogenous Market Structure and the Business Cycle," Working Papers 126, University of Milano-Bicocca, Department of Economics, revised Nov 2007.
  4. David B. Audretsch, 1995. "Innovation and Industry Evolution," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262011468, December.
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  7. Federico Etro, 2008. "Stackelberg Competition with Endogenous Entry," Economic Journal, Royal Economic Society, vol. 118(532), pages 1670-1697, October.
  8. Bresnahan, Timothy F, 1981. "Duopoly Models with Consistent Conjectures," American Economic Review, American Economic Association, vol. 71(5), pages 934-45, December.
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  26. Federico Etro, 2009. "The Economic Impact of Cloud Computing on Business Creation, Employment and Output in Europe. An application of the Endogenous Market Structures Approach to a GPT innovation," Review of Business and Economics, Katholieke Universiteit Leuven, Faculteit Economie en Bedrijfswetenschappen, vol. 0(2), pages 179-208.
  27. Jaimovich, Nir & Floetotto, Max, 2008. "Firm dynamics, markup variations, and the business cycle," Journal of Monetary Economics, Elsevier, vol. 55(7), pages 1238-1252, October.
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Citations

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Cited by:
  1. Maria José Gil-Moltó & Dimitrios Varvarigos, 2013. "Endogenous Market Structure, Occupational Choice, and Growth Cycles," Discussion Papers in Economics 13/05, Department of Economics, University of Leicester.
  2. Federico Etro & Andrea Colciago, 2010. "Endogenous Market Structures and the Business Cycle," Economic Journal, Royal Economic Society, vol. 120(549), pages 1201-1233, December.
  3. Maria José Gil-Moltó & Dimitrios Varvarigos, 2012. "Industry Dynamics and Indeterminacy in an OLG Economy with Endogenous Occupational Choice," Discussion Papers in Economics 12/09, Department of Economics, University of Leicester, revised Sep 2012.
  4. Colciago , Andrea & Rossi, Lorenza, 2011. "Endogenous market structures and labour market dynamics," Research Discussion Papers 12/2011, Bank of Finland.
  5. Totzek, Alexander, 2011. "Banks, oligopolistic competition, and the business cycle: A new financial accelerator approach," Economics Working Papers 2011,02, Christian-Albrechts-University of Kiel, Department of Economics.
  6. Andrea Colciago & Lorenza Rossi, 2011. "Endogenous Market Structures and Labor Market Dynamics (New version)," Quaderni di Dipartimento 155, University of Pavia, Department of Economics and Quantitative Methods.

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