Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/83125
Authors: 
Lundin, Magnus
Gottfries, Nils
Bucht, Charlotte
Lindström, Tomas
Year of Publication: 
2007
Series/Report no.: 
Working Paper, Department of Economics, Uppsala University 2004:7
Abstract: 
We construct a model of a firm competing for market share in a customer market and making investments in physical capital. The firm is financially constrained and there are implementation lags in investment. Our model predicts that product prices should depend on costs and competitors' prices, but respond weakly to demand shocks. Also, prices should be strongly related to investment. Estimating price and investment equations on panel data for Swedish manufacturing plants we find results which are qualitatively in line with these predictions, though the relation between investment and prices is stronger than predicted by our model.
Subjects: 
price rigidity
price equation
investment equation
credit constraint
JEL: 
D43
E31
E32
E44
L11
L13
L16
Document Type: 
Working Paper

Files in This Item:
File
Size
149.51 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.