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Lumpy Consumer Durables, Market Power, and Endogenous Business Cycles

  • Kala Krishna
  • Cemile Yavas

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 National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8296.

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Date of creation: May 2001
Date of revision:
Publication status: published as Krishna, Kala and Cemile Yavas. "Lumpy Consumer Durables, Market Power, And Endogenous Business Cycles," Canadian Journal of Economics, 2004, v37(2,May), 375-391.
Handle: RePEc:nbr:nberwo:8296
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