Entry and Exit, Product Variety and the Business Cycle

Satyajit Chatterjee () and Russell Cooper

No 4562, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study the stochastic behavior of a dynamic general equilibrium model with monopolistic competition. Each seller sells his product in the consumption goods as well as the investment goods market and has market power in both. Consumers derive utility from a CES aggregate of all the consumption goods and augment their capital stock by a CES aggregate of all the investment goods. We analyze the equilibrium of this economy allowing for an endogenous determination of the number of firms and therefore of products. The principal effect we highlight is the endogenous propagation and magnification of technology and preference disturbances through product space variations.

New Economics Papers: this item is included in nep-dge, nep-ind, nep-ino and nep-mic
Date: 1993-12
Note: EFG
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Working Paper: Entry and exit, product variety and the business cycle (1993)
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