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Article: Endogenous markups, intensity of competition, and persistence of business cycles

TitleEndogenous markups, intensity of competition, and persistence of business cycles
Authors
Issue Date2007
PublisherSouthern Economic Association. The Journal's web site is located at http://www.okstate.edu/economics/journal/jour1.html
Citation
Southern Economic Journal, 2007, v. 74 n. 2, p. 546-565 How to Cite?
AbstractIn order to study the propagation mechanism of business cycles, in particular to investigate how the intensity of competition affects market structure and output persistence over business cycles, this paper presents a real business-cycle model with imperfect competition and increasing returns to scale. This analysis considers the markups of price over cost to be endogenous. With endogenous markups, two standard forms of oligopolistic competition - Bertrand and Cournot - are considered. Results show that: (1) the propagation mechanism in the sense of output persistence is greater under Cournot; (2) the propagation mechanism is unequivocally greater with imperfect competition, regardless of whether markups are endogenous or not; and (3) under imperfect competition, the propagation mechanism is greater with endogenous markups than with exogenous markups. Overall, these results suggest that more intense competition produces lower persistence in output growth and, thus, a weaker propagation mechanism. In a calibration exercise, these differences were also found to be quantitatively important.
Persistent Identifierhttp://hdl.handle.net/10722/177749
ISSN
2015 Impact Factor: 0.788
2015 SCImago Journal Rankings: 0.586
References

 

DC FieldValueLanguage
dc.contributor.authorZhang, Jen_US
dc.date.accessioned2012-12-19T09:39:47Z-
dc.date.available2012-12-19T09:39:47Z-
dc.date.issued2007en_US
dc.identifier.citationSouthern Economic Journal, 2007, v. 74 n. 2, p. 546-565en_US
dc.identifier.issn0038-4038en_US
dc.identifier.urihttp://hdl.handle.net/10722/177749-
dc.description.abstractIn order to study the propagation mechanism of business cycles, in particular to investigate how the intensity of competition affects market structure and output persistence over business cycles, this paper presents a real business-cycle model with imperfect competition and increasing returns to scale. This analysis considers the markups of price over cost to be endogenous. With endogenous markups, two standard forms of oligopolistic competition - Bertrand and Cournot - are considered. Results show that: (1) the propagation mechanism in the sense of output persistence is greater under Cournot; (2) the propagation mechanism is unequivocally greater with imperfect competition, regardless of whether markups are endogenous or not; and (3) under imperfect competition, the propagation mechanism is greater with endogenous markups than with exogenous markups. Overall, these results suggest that more intense competition produces lower persistence in output growth and, thus, a weaker propagation mechanism. In a calibration exercise, these differences were also found to be quantitatively important.en_US
dc.languageengen_US
dc.publisherSouthern Economic Association. The Journal's web site is located at http://www.okstate.edu/economics/journal/jour1.htmlen_US
dc.relation.ispartofSouthern Economic Journalen_US
dc.titleEndogenous markups, intensity of competition, and persistence of business cyclesen_US
dc.typeArticleen_US
dc.identifier.emailZhang, J: jjzhang@econ.hku.hken_US
dc.identifier.authorityZhang, J=rp01124en_US
dc.description.naturelink_to_subscribed_fulltexten_US
dc.identifier.scopuseid_2-s2.0-36349012369en_US
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-36349012369&selection=ref&src=s&origin=recordpageen_US
dc.identifier.volume74en_US
dc.identifier.issue2en_US
dc.identifier.spage546en_US
dc.identifier.epage565en_US
dc.publisher.placeUnited Statesen_US
dc.identifier.scopusauthoridZhang, J=55367373100en_US

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