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Real Business Cycles with Cournot Competition and Endogenous Entry

  • Andrea Colciago

    ()

  • Federico Etro

    ()

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.

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File URL: http://dipeco.economia.unimib.it/repec/pdf/mibwpaper135.pdf
File Function: First version, 2008
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Paper provided by University of Milano-Bicocca, Department of Economics in its series Working Papers with number 135.

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Length: 30 pages
Date of creation: Sep 2007
Date of revision: Feb 2008
Handle: RePEc:mib:wpaper:135
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  1. repec:sen:rebelj:v:liv:y:2009:i:2:p:179-209 is not listed on IDEAS
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  17. Federico Etro, 2008. "Stackelberg Competition with Endogenous Entry," Economic Journal, Royal Economic Society, vol. 118(532), pages 1670-1697, October.
  18. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November.
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  20. 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.
  21. Jordi Gali & Mark Gertler & J. David Lopez-Salido, 2002. "Markups, Gaps, and the Welfare Costs of Business Fluctuations," NBER Working Papers 8850, National Bureau of Economic Research, Inc.
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  23. Christian Broda & David E. Weinstein, 2007. "Product Creation and Destruction: Evidence and Price Implications," NBER Working Papers 13041, National Bureau of Economic Research, Inc.
  24. Federico Etro, 2004. "Innovation by leaders," Economic Journal, Royal Economic Society, vol. 114(495), pages 281-303, 04.
  25. Bernard, Andrew B. & Redding, Stephen J. & Schott, Peter K., 2006. "Multi-Product Firms and Product Switching," CEPR Discussion Papers 5708, C.E.P.R. Discussion Papers.
  26. Kimball, Miles S, 1995. "The Quantitative Analytics of the Basic Neomonetarist Model," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(4), pages 1241-77, November.
  27. Federico Etro, 2012. "Endogenous Market Structures and Welfare," Working Papers 2012_12, Department of Economics, University of Venice "Ca' Foscari".
  28. Timothy F. Bresnahan & Peter C. Reiss, 1987. "Do Entry Conditions Vary across Markets?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(3), pages 833-882.
  29. Devereux, Michael B & Lee, Khang Min, 2001. "Dynamic Gains from International Trade with Imperfect Competition and Market Power," Review of Development Economics, Wiley Blackwell, vol. 5(2), pages 239-55, June.
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