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Product Scope and Endogenous Fluctuations

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  • Weder, Mark
  • Pavlov, Oscar

Abstract

Recent empirical evidence suggests that product creation is procyclical and it occurs largely within existing fi rms. Motivated by these findings, the current paper investigates the role of intrafi rm product scope choice in a general equilibrium economy with oligopolistic producers. We show that the multi-product nature of fi rms makes the economy signifi cantly more susceptible to sunspot equilibria. The estimated indeterminate model generates artifi cial business cycles that closely resemble empirically observed fl uctuations.

Suggested Citation

  • Weder, Mark & Pavlov, Oscar, 2015. "Product Scope and Endogenous Fluctuations," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112942, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc15:112942
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    Cited by:

    1. Stephen McKnight & Laura Povoledo, 2022. "Endogenous fluctuations and international business cycles," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 55(1), pages 312-348, February.
    2. Wei Dai & Mark Weder & Bo Zhang, 2020. "Animal Spirits, Financial Markets, and Aggregate Instability," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 52(8), pages 2053-2083, December.
    3. Pavlov, Oscar, 2021. "Multi-product firms and increasing marginal costs," Journal of Economic Dynamics and Control, Elsevier, vol. 133(C).
    4. Pavlov, Oscar & Weder, Mark, 2022. "Endogenous product scope: Market interlacing and aggregate business cycle dynamics," European Economic Review, Elsevier, vol. 148(C).
    5. Xue, Jianpo & Yip, Chong K., 2018. "Home production, balanced-budget taxation and economic (in)stability," Journal of Macroeconomics, Elsevier, vol. 56(C), pages 231-242.

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    More about this item

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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