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On the counter-cyclicality of prices and markups in a Cournot model of entry

  • Plehn-Dujowich, Jose M.
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    We prove in a Cournot model that the price and markup are counter-cyclical due to changes in the extent of competition if the income effect is decreasing in the price, as occurs when preferences are homothetic or demand is isoelastic.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0165-1765(07)00279-0
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    Article provided by Elsevier in its journal Economics Letters.

    Volume (Year): 99 (2008)
    Issue (Month): 2 (May)
    Pages: 310-313

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    Handle: RePEc:eee:ecolet:v:99:y:2008:i:2:p:310-313
    Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

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    1. Judith A. Chevalier & Anil K. Kashyap & Peter E. Rossi, 2003. "Why Don't Prices Rise During Periods of Peak Demand? Evidence from Scanner Data," American Economic Review, American Economic Association, vol. 93(1), pages 15-37, March.
    2. Paul Klemperer, 1995. "Competition when Consumers have Switching Costs: An Overview with Applications to Industrial Organization, Macroeconomics, and International Trade," Review of Economic Studies, Oxford University Press, vol. 62(4), pages 515-539.
    3. Robert J. Barro & Silvana Tenreyro, 2000. "Closed and Open Economy Models of Business Cycles with Marked Up and Sticky Prices," NBER Working Papers 8043, National Bureau of Economic Research, Inc.
    4. Mark Bils, 1989. "Pricing in a Customer Market," The Quarterly Journal of Economics, Oxford University Press, vol. 104(4), pages 699-718.
    5. Julio J. Rotemberg & Michael Woodford, 1991. "Markups and the Business Cycle," NBER Chapters, in: NBER Macroeconomics Annual 1991, Volume 6, pages 63-140 National Bureau of Economic Research, Inc.
    6. Claude d'ASPREMONT & Rodolphe DOS SANTOS FERREIRA & Louis-André GERARD-VARET, 1995. "Imperfect Competition in an Overlapping Generations Model: A Case for Fiscal Policy," Annals of Economics and Statistics, GENES, issue 37-38.
    7. MacDonald, James M, 2000. "Demand, Information, and Competition: Why Do Food Prices Fall at Seasonal Demand Peaks?," Journal of Industrial Economics, Wiley Blackwell, vol. 48(1), pages 27-45, March.
    8. Bresnahan, Timothy F, 1987. "Competition and Collusion in the American Automobile Industry: The 1955 Price War," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 457-82, June.
    9. Paul Klemperer, 1995. "Competition when Consumers have Switching Costs: An Overview with Applications to Industrial Organization, Macroeconomics, and International Trade," Review of Economic Studies, Oxford University Press, vol. 62(4), pages 515-539.
    10. repec:adr:anecst:y:1995:i:37-38:p:17 is not listed on IDEAS
    11. Satyajit Chatterjee & Russell Cooper & B. Ravikumar, 1993. "Strategic Complementarity in Business Formation: Aggregate Fluctuations and Sunspot Equilibria," Review of Economic Studies, Oxford University Press, vol. 60(4), pages 795-811.
    12. Elizabeth J. Warner & Robert B. Barsky, 1995. "The Timing and Magnitude of Retail Store Markdowns: Evidence from Weekends and Holidays," The Quarterly Journal of Economics, Oxford University Press, vol. 110(2), pages 321-352.
    13. Chevalier, Judith A & Scharfstein, David S, 1995. "Liquidity Constraints and the Cyclical Behavior of Markups," American Economic Review, American Economic Association, vol. 85(2), pages 390-96, May.
    14. Satyajit Chatterjee & Russell Cooper & B. Ravikumar, 1993. "Strategic Complementarity in Business Formation: Aggregate Fluctuations and Sunspot Equilibria," Review of Economic Studies, Oxford University Press, vol. 60(4), pages 795-811.
    15. Porter, Robert H., 1983. "Optimal cartel trigger price strategies," Journal of Economic Theory, Elsevier, vol. 29(2), pages 313-338, April.
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