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Lumpy consumer durables, market power, and endogenous business cycles
Author(s) -
Krishna Kala,
Yavas Cemile
Publication year - 2004
Publication title -
canadian journal of economics/revue canadienne d'économique
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.773
H-Index - 69
eISSN - 1540-5982
pISSN - 0008-4085
DOI - 10.1111/j.0008-4085.2004.00007.x
Subject(s) - ceteris paribus , economics , market power , recession , business cycle , durable good , monetary economics , market size , microeconomics , commerce , macroeconomics , monopoly
. In this paper we show that lumpy consumer durables and market power can generate endogenous cycles consistent with the facts. Past sales determine the current market size of durable goods. Larger past sales, ceteris paribus, thus naturally result in a smaller current market size and income. In this manner, the seeds of a downturn are sown in an upturn. JEL Classification: E32, E13