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A Note on Industry Dynamics and Countercyclical Markups

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Authors
Kim, Young Sik
Issue Date
2008-09
Publisher
서울대학교 경제연구소
Citation
경제논집, Vol.47 No.2/3, pp. 245-252
Abstract
In order to explain countercyclical markups, a simple two-period model of industry

dynamics is constructed where output is produced potentially by two firms which are

subject to idiosyncratic productivity shocks as well as aggregate productivity shocks.

During booms, both firms with low and high productivity stay in the market and engage in

a Bertrand-type competition to yield marginal-cost pricing, implying zero markups. During

recessions, however, firm with low productivity shock decides to exit, allowing the highproductivity

firm to enjoy positive markups as a monopolist in the output market.
ISSN
1738-1150
Language
English
URI
https://hdl.handle.net/10371/62068
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College of Social Sciences (사회과학대학)Institute of Economics Research (경제연구소)경제논집경제논집 vol.47 (2008)
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