Product Scope and Endogenous Fluctuations

Mark Weder and Oscar Pavlov

No 2015-03, School of Economics and Public Policy Working Papers from University of Adelaide, School of Economics and Public Policy

Abstract: Recent empirical evidence suggests that product creation is pro-cyclical and it occurs largely within existing firms. Motivated by these findings, the current paper investigates the role of intra-firm product scope choice in a general equilibrium economy with oligopolistic producers. We show that the multi-product nature of firms makes the economy significantly more susceptible to sunspot equilibria. The estimated indeterminate model generates artificial business cycles that closely resemble empirically observed fluctuations.

Keywords: Indeterminacy; sunspot equilibria; multi-product firms; business cycles; Bayesian estimation. (search for similar items in EconPapers)
JEL-codes: E32 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2015-02
New Economics Papers: this item is included in nep-bec, nep-dge and nep-mac
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Related works:
Journal Article: Product Scope and Endogenous Fluctuations (2017)
Working Paper: Product Scope and Endogenous Fluctuations (2015)
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