TY  - JOUR
AU  - Bils,Mark
TI  - Cyclical Pricing of Durable Goods
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3050
PY  - 1989
Y2  - July 1989
UR  - http://www.nber.org/papers/w3050
L1  - http://www.nber.org/papers/w3050.pdf
N1  - Author contact info:
Mark Bils
Department of Economics
University of Rochester
Rochester, NY 14627
Tel: 585/275-0488
Fax: 585/256-2309
E-Mail: bils@troi.cc.rochester.edu
AB  - I examine price markups in monopolisticly-competitive markets that experience fluctuations in demand because the economy experiences cyclical fluctuations in productivity. Markups depend positively on the average income of purchasers in the market. For a nondurable good average income of purchasers is procyclical; so the markup is procyclical. For a durable good. however. the average income of purchasers is likely to decrease in booms because low income consumers of the good concentrate their purchases in boom periods; so the markup is likely countercyclical. This is particularly true for growing markets. I find markups make the aggregate economy fluctuate more in response to productivity if goods are sufficiently durable. 
ER  -