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Capitalizing Implementation Cycles

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  • Michail E. Rousakis

    (University of Warwick)

Abstract

Building on Shleifer (1986), capital is introduced to a world with temporary monopolies and no uncertainty, where agents share the same expectations about future and have perfect foresight. It is subsequently shown that, although firms acquire patents at an exogenous, perfectly smooth rate, they may coordinate and implement these simultaneously if their expectations are accordingly formed, due to the presence of strategic complementarities. Then the economy can still grow in cycles, although investment is fully reversible and a storable commodity present, and, despite agents being able to perfectly borrow against their future earnings. This permits the study of the evolution of aggregate economic magnitudes along the balanced growth path under temporary monopolies. Most notably, capital-specific investment is shown to be countercyclical.

Suggested Citation

  • Michail E. Rousakis, 2010. "Capitalizing Implementation Cycles," 2010 Meeting Papers 1184, Society for Economic Dynamics.
    • Handle: RePEc:red:sed010:1184
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    References listed on IDEAS

    as
    1. Grandmont, Jean-Michel, 1985. "On Endogenous Competitive Business Cycles," Econometrica, Econometric Society, vol. 53(5), pages 995-1045, September.
    2. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-1370, November.
    3. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
    4. Shleifer, Andrei, 1986. "Implementation Cycles," Journal of Political Economy, University of Chicago Press, vol. 94(6), pages 1163-1190, December.
    5. Boldrin, Michele & Woodford, Michael, 1990. "Equilibrium models displaying endogenous fluctuations and chaos : A survey," Journal of Monetary Economics, Elsevier, vol. 25(2), pages 189-222, March.
    6. Azariadis, Costas, 1981. "Self-fulfilling prophecies," Journal of Economic Theory, Elsevier, vol. 25(3), pages 380-396, December.
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