ENTRY AND EXIT, PRODUCT VARIETY, AND THE BUSINESS CYCLE

Satyajit Chatterjee () and Russell Cooper

Economic Inquiry, 2014, vol. 52, issue 4, 1466-1484

Abstract: type="main" xml:id="ecin12091-abs-0001"> 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 constant elasticity of substitution (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 wish to highlight is the endogenous propagation and magnification of technology and preference disturbances through product space variations. ( JEL E32, D43, L16)

Date: 2014
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Working Paper: Entry and exit, product variety and the business cycle (1993)
Working Paper: Entry and Exit, Product Variety and the Business Cycle (1993)
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