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Search in the product market and the real business cycle

Thomas Mathä () and Olivier Pierrard ()

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Abstract: Empirical evidence suggests that most firms operate in imperfectly competitive markets. 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, which depend on firms' relative bargaining power. We simulate the general equilibrium model and explore the role of product market search frictions for business cycles. We conclude from the simulation exercise that incorporating product market search and improve the standard real business cycle model to reproduce US business cycle fluctuations.

Keywords: E10; E31; E32; Business cycle; Frictions; Search; Product market; Price bargain (search for similar items in EconPapers)
Date: 2011-06-01
Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00828982
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Published in Journal of Economic Dynamics & Control, Elsevier, 2011, <10.1016/j.jedc.2011.03.001>

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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 (2009) Downloads
Working Paper: Search in the product market and the real business cycle (2008) Downloads
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