Lumpy Consumer Durables, Market Power, and Endogenous Business Cycles
Kala Krishna, Cemile Yavas
NBER Working Paper No. 8296
This paper examines the role of lumpy consumer durables and market power in generating endogenous cycles which seem to be consistent with the facts. When goods are durable, past consumption choices determine the current market size which consists of consumers who have not purchased the good previously, and who have the income to make their potential demand effective. Larger past sales, ceteris paribus, thus naturally result in a smaller current market size and income. In this manner, the seeds of a downturn are sown in an upturn.
Published: Krishna, Kala and Cemile Yavas. "Lumpy Consumer Durables, Market Power, And Endogenous Business Cycles," Canadian Journal of Economics, 2004, v37(2,May), 375-391.