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Endogenous Firms and Endogenous Business Cycles


  • Hans Jørgen Jacobsen

    (University of Copenhagen Institute of Economics)


The 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.

Suggested Citation

  • Hans Jørgen Jacobsen, 1998. "Endogenous Firms and Endogenous Business Cycles," Discussion Papers 98-15, University of Copenhagen. Department of Economics.
  • Handle: RePEc:kud:kuiedp:9815

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    Cited by:

    1. Rodolphe Dos Santos Ferreira, 1999. "La relations salaire-emploi sous l'éclairage de la concurrence imparfaite," Cahiers d'Économie Politique, Programme National Persée, vol. 34(1), pages 15-40.

    More about this item


    endogenous fluctuations; imperfect competition; endogenous firms; love of variety; endogenous markups;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - 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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