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Business Cycle in a Macromodel with Oligopoly and Agents’ Heterogeneity: An Agent-Based Approach

Marco Mazzoli (), Matteo Morini and Pietro Terna ()
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Marco Mazzoli: University of Genova

Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, 2017, vol. 3, issue 3, 389-417

Abstract: Abstract This paper introduces a macromodel with oligopoly and entry/exit in a framework where individuals are heterogeneous in their budget constraints, since they can be workers, new entrant entrepreneurs, incumbent entrepreneurs or unemployed and may change their status due to a stochastic process, associated to entry and exit. Agents’ heterogeneity is explicitly modelled in the aggregate demand, that also accounts for the income distribution. Heterogeneity also plays a relevant role in the process of entry/exit in the goods market, which interacts with the labour market and generates macroeconomic fluctuations. As shown in the agent-based numerical simulation, the model provides a new interpretation of the business cycle and an explanation for the empirical phenomenon of countercyclical mark up.

Keywords: Cycles; Aggregate income distribution; Industrial organization; Macroeconomics (search for similar items in EconPapers)
JEL-codes: E32 E25 L16 (search for similar items in EconPapers)
Date: 2017
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