We characterize endogenous market structures under Bertrand and Cournot competition in a DSGE model. Short run markups vary countercyclically because of the impact of entry on competition. Long run markups are decreasing in the discount factor and in productivity, and increasing in the exit rate and in the entry costs. Dynamic inefficiency can emerge due to excessive entry under Cournot competition. Positive temporary shocks attract entry, which strengthens competition so as to temporary reduce the markups and increase real wages: this competition effect creates an intertemporal substitution effect which boosts consumption and employment. Endogenous market structures improve the ability of a flexible prices model in matching impulse response functions and second moments for US data

Colciago, A., & Etro, F. (2010). Endogenous Market Strucure and the Business Cycle. ECONOMIC JOURNAL, 120(549), 1201-1233 [10.1111/j.1468-0297.2010.02384.x].

Endogenous Market Strucure and the Business Cycle

COLCIAGO, ANDREA;ETRO, FEDERICO
2010

Abstract

We characterize endogenous market structures under Bertrand and Cournot competition in a DSGE model. Short run markups vary countercyclically because of the impact of entry on competition. Long run markups are decreasing in the discount factor and in productivity, and increasing in the exit rate and in the entry costs. Dynamic inefficiency can emerge due to excessive entry under Cournot competition. Positive temporary shocks attract entry, which strengthens competition so as to temporary reduce the markups and increase real wages: this competition effect creates an intertemporal substitution effect which boosts consumption and employment. Endogenous market structures improve the ability of a flexible prices model in matching impulse response functions and second moments for US data
Articolo in rivista - Articolo scientifico
Scientifica
Endogenous Market Structure, Firms' Entry, Business Cycle
English
1201
1233
http://docs.google.com/fileview?id=0B3O_tvevW_ocZmFmZjJjZWUtNmE4MC00NGY3LWEzYmMtN2ZjYzg3NTI0NzIy&hl=en
Colciago, A., & Etro, F. (2010). Endogenous Market Strucure and the Business Cycle. ECONOMIC JOURNAL, 120(549), 1201-1233 [10.1111/j.1468-0297.2010.02384.x].
Colciago, A; Etro, F
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/10281/16107
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