Product Cycle and Prices: a Search Foundation

Mei Dong, Toshiaki Shoji and Yuki Teranishi
Additional contact information
Mei Dong: University of Melbourne
Toshiaki Shoji: Seikei University

No 9, Working Papers on Central Bank Communication from University of Tokyo, Graduate School of Economics

Abstract: This paper develops a price model with a product cycle. Through a frictional product market with search and matching frictions, an endogenous product cycle is accompanied with a price cycle where a price for a new good and a price for an existing good are set in a different manner. This model nests a New Keynesian Phillips curve with the Calvo's price adjustment as a special case and generates several new phenomena. Our simple model captures observed facts in Japanese product level data such as the pro-cyclicality among product entry, demand, and price. In a general equilibrium model, an endogenous product entry increases variation of the inflation rate by 20 percent in Japan. This number increases to 72 percent with a price discounting after a first price.

Keywords: Phillips curve; product and price cycles; search and matching (search for similar items in EconPapers)
Pages: 52 pages
Date: 2019-09
New Economics Papers: this item is included in nep-com, nep-dge and nep-mac
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Product Cycles and Prices: a Search Foundation (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:upd:utmpwp:009

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