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Lumpy consumer durables, market power, and endogenous business cycles

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  • Kala Krishna
  • Cemile Yavas

Abstract

. 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 Biens de consommation durables en gros morceaux, pouvoir de marché et cycles d’affaires endogènes. Ce mémoire montre que des biens de consommation durables en gros morceaux et du pouvoir de marché peuvent engendrer des cycles endogènes qui se calquent sur les chroniques observées. Les ventes passées déterminent la taille du marché présent pour les biens durables. De plus grandes ventes dans le passé, toutes choses étant égales par ailleurs, résultent naturellement en un marché présent plus petit et des revenus moindres. De cette manière, le germe du déclin est déjà contenu dans l’expansion.

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  • Kala Krishna & Cemile Yavas, 2004. "Lumpy consumer durables, market power, and endogenous business cycles," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 37(2), pages 375-391, May.
    • Handle: RePEc:wly:canjec:v:37:y:2004:i:2:p:375-391
    DOI: 10.1111/j.0008-4085.2004.00007.x
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    1. Kala Krishna & Cemile Yavas, 2004. "Lumpy consumer durables, market power, and endogenous business cycles," Canadian Journal of Economics, Canadian Economics Association, vol. 37(2), pages 375-391, May.
    2. Soo, Kwok Tong, 2017. "Indivisibilities in the Ricardian model of trade," Economic Modelling, Elsevier, vol. 63(C), pages 311-317.
    3. Kala Krishna & Cemile Yavas, 2002. "When Does Trade Hurt? Market, Transition and Developing Economies," NBER Working Papers 8995, National Bureau of Economic Research, Inc.

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    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical

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