Endogenous Firms and Endogenous Business Cycles

Hans Jørgen Jacobsen
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Hans Jørgen Jacobsen: University of Copenhagen Institute of Economics

No 98-15, Discussion Papers from University of Copenhagen. Department of Economics

Abstract: 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.

Keywords: endogenous fluctuations; imperfect competition; endogenous firms; love of variety; endogenous markups (search for similar items in EconPapers)
JEL-codes: D43 E10 E32 (search for similar items in EconPapers)
Pages: 22 pages
Date: 1998-09
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:kud:kuiedp:9815

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