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Lumpy Consumer Durables, Market Power, and Endogenous Business Cycles

  • Krishna, Kala

    (Pennsylvania State U)

  • Yavas, Cemile

This paper examines the role of lumpy consumer durables and market power in generating endogenous cycles which seem to be consistent with the facts. When goods are durable, past consumption choices determine the current market size which consists of consumers who have not purchased the good previously, and who have the income to make their potential demand effective. Larger past sales, ceteris paribus, thus naturally result in a smaller current market size and income. In this manner, the seeds of a downturn are sown in an upturn.

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Paper provided by Pennsylvania State University, Department of Economics in its series Working Papers with number 3-01-1.

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Date of creation: Mar 2001
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Handle: RePEc:ecl:peneco:3-01-1
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  8. Peter Diamond & Drew Fudenberg, 1987. "Rational Expectations Business Cycles in Search Equilibrium," Working papers 465, Massachusetts Institute of Technology (MIT), Department of Economics.
  9. Solon, Gary & Barsky, Robert & Parker, Jonathan A, 1994. "Measuring the Cyclicality of Real Wages: How Important Is Composition Bias?," The Quarterly Journal of Economics, MIT Press, vol. 109(1), pages 1-25, February.
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  11. Grandmont Jean-michel, 1983. "On endogenous competitive business cycles," CEPREMAP Working Papers (Couverture Orange) 8316, CEPREMAP.
  12. Caplin, Andrew S, 1985. "The Variability of Aggregate Demand with (S, s) Inventory Policies," Econometrica, Econometric Society, vol. 53(6), pages 1395-1409, November.
  13. Stokey, Nancy L, 1979. "Intertemporal Price Discrimination," The Quarterly Journal of Economics, MIT Press, vol. 93(3), pages 355-71, August.
  14. Mark Bils, 1989. "Cyclical Pricing of Durable Goods," NBER Working Papers 3050, National Bureau of Economic Research, Inc.
  15. Ng Yew Kwang, 1965. "Why do People Buy Lottery Tickets? Choices Involving Risk and the Indivisibility of Expenditure," Journal of Political Economy, University of Chicago Press, vol. 73, pages 530.
  16. Bulow, Jeremy I, 1982. "Durable-Goods Monopolists," Journal of Political Economy, University of Chicago Press, vol. 90(2), pages 314-32, April.
  17. Shleifer, Andrei, 1986. "Implementation Cycles," Scholarly Articles 3451303, Harvard University Department of Economics.
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