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Real Business Cycles with Cournot Competition and Endogenous Entry

Author

Listed:
  • Andrea Colciago

  • Federico Etro

Abstract

We introduce Cournot competition and endogenous entry in an oth- erwise neoclassical macroeconomic framework. First, we develop a model with exogenous savings à la Solow describing the dynamic path of busi- ness 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 pro?ts 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.

Suggested Citation

  • Andrea Colciago & Federico Etro, 2007. "Real Business Cycles with Cournot Competition and Endogenous Entry," Working Papers 135, University of Milano-Bicocca, Department of Economics, revised Feb 2008.
    • Handle: RePEc:mib:wpaper:135
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    Cited by:

    1. Federico Etro, 2014. "The Theory Of Endogenous Market Structures," Journal of Economic Surveys, Wiley Blackwell, vol. 28(5), pages 804-830, December.
    2. Poutineau, Jean-Christophe & Vermandel, Gauthier, 2015. "Financial frictions and the extensive margin of activity," Research in Economics, Elsevier, vol. 69(4), pages 525-554.
    3. Benchimol, Jonathan & Bozou, Caroline, 2024. "Desirable banking competition and stability," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 73, pages 1-28.
    4. Etro, Federico, 2019. "The Romer model with monopolistic competition and general technologies," Economics Letters, Elsevier, vol. 181(C), pages 1-6.
    5. Etro, Federico & Rossi, Lorenza, 2015. "Optimal monetary policy under Calvo pricing with Bertrand competition," Journal of Macroeconomics, Elsevier, vol. 45(C), pages 423-440.
    6. Andrea Colciago & Lorenza Rossi, 2011. "Endogenous Market Structures and Labor Market Dynamics," Quaderni di Dipartimento 139, University of Pavia, Department of Economics and Quantitative Methods, revised Feb 2011.
    7. Rui Faustino, 2019. "Endogenous Quality and Firm Entry," Working Papers REM 2019/0107, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    8. Fabio Ghironi, 2018. "Macro needs micro," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 34(1-2), pages 195-218.
    9. Cheng-wei Chang & Ching-chong Lai, 2021. "Optimal fiscal policies and market structures with monopolistic competition," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 28(6), pages 1385-1411, December.
    10. Pavol Majher, 2015. "Firm entry and exit, investment irreversibility, and business cycle dynamics," Vienna Economics Papers 1513, University of Vienna, Department of Economics.
    11. Savagar, Anthony, 2021. "Measured productivity with endogenous markups and economic profits," Journal of Economic Dynamics and Control, Elsevier, vol. 133(C).
    12. Andrea Colciago & Lorenza Rossi, 2011. "Endogenous Market Structures and Labor Market Dynamics," Quaderni di Dipartimento 139, University of Pavia, Department of Economics and Quantitative Methods, revised Feb 2011.
    13. Ozu, Atsushi & Kasuga, Norihiro & Morikawa, Hiroyuki, 2020. "Cloud computing and its impact on the Japanese macroeconomy–its oligopolistic market characteristics and social welfare," Telecommunications Policy, Elsevier, vol. 44(1).
    14. 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, Division of Economics, School of Business, University of Leicester, revised Sep 2012.
    15. 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.
    16. Federico Etro & Andrea Colciago, 2010. "Endogenous Market Structures and the Business Cycle," Economic Journal, Royal Economic Society, vol. 120(549), pages 1201-1233, December.
    17. Bianca Barbaro & Giorgio Massari & Patrizio Tirelli, 2022. "Who killed business dynamism in the U.S.?," Working Papers 494, University of Milano-Bicocca, Department of Economics, revised Aug 2022.
    18. Pavol Majher, 2015. "Firm entry and exit, investment irreversibility, and business cycle dynamics," Vienna Economics Papers vie1513, University of Vienna, Department of Economics.
    19. 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.
    20. Varvarigos, Dimitrios & Gil-Moltó, Maria José, 2016. "Endogenous Market Structure, Occupational Choice, And Growth Cycles," Macroeconomic Dynamics, Cambridge University Press, vol. 20(1), pages 70-94, January.
    21. Federico Etro, 2018. "Macroeconomics with Endogenous Markups and Optimal Taxation," Southern Economic Journal, John Wiley & Sons, vol. 85(2), pages 378-406, October.
    22. Etro, Federico & Rossi, Lorenza, 2015. "New-Keynesian Phillips curve with Bertrand competition and endogenous entry," Journal of Economic Dynamics and Control, Elsevier, vol. 51(C), pages 318-340.

    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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