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Search in the Product Market and the Real Business Cycle

Thomas Mathä () and Olivier Pierrard ()

No 2009019, Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: Empirical evidence suggests that most firms operate in imperfectly competitivemarkets. We develop a search-matching model between wholesalers and retailers. Firms face search costs and form long-term relationships. Price bargain results in both wholesaler and retailer markups, depending on firms’ relative bargaining power. We simulate the model to explore the role of product market search frictions in business cycles. We show that the way search costs are modelled is crucial to provide a realistic picture of firms’ business environment and improve the cyclical properties of an otherwise standard real business cycle model.

Keywords: Business cycle; Frictions; Product market; Price bargain (search for similar items in EconPapers)
JEL-codes: E10 E31 E32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-dge, nep-mac and nep-mkt
Date: 2009-07-01
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http://sites.uclouvain.be/econ/DP/IRES/2009019.pdf (application/pdf)

Related works:
Journal Article: Search in the product market and the real business cycle (2011) Downloads
Working Paper: Search in the product market and the real business cycle (2011) Downloads
Working Paper: Search in the product market and the real business cycle (2009) Downloads
Working Paper: Search in the product market and the real business cycle (2008) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:ctl:louvir:2009019

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