Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/83905
Authors: 
Costa, Luís F.
Dixon, Huw D.
Year of Publication: 
2007
Series/Report no.: 
Cardiff Economics Working Papers E2007/28
Abstract: 
We develop a dynamic general equilibrium model of imperfect competition where a sunk cost of creating a new product regulates the type of entry that dominates in the economy: new products or more competition in existing industries. Considering the process of product innovation is irreversible, introduces hysteresis in the business cycle. Expansionary shocks may lead the economy to a new ‘prosperity plateau,’ but contractionary shocks only affect the market power of mature industries.
Subjects: 
Entry
Hysteresis
Mark-up
JEL: 
E62
L13
L16
Document Type: 
Working Paper

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