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on Business Economics |
| By: | Qazi Haque; Oscar Pavlov; Mark Weder |
| Abstract: | Recent decades have seen a rise in the market power of large firms. We propose a theory in which their technology involves the ability to produce multiple products. Large firms interact with smaller competitors and market share reallocations via product creation generate heterogeneous markup dynamics across the firm types. Higher market shares of large firms increase the parameter space for macroeconomic indeterminacy. Bayesian estimation of the general equilibrium model suggests the importance of the endogenous amplification of the product creation channel and animal spirits play a non-trivial role in driving U.S. business cycles. |
| Keywords: | indeterminacy, business cycles, multi-product firms, animal spirits, Bayesian estimation |
| JEL: | E32 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:een:camaaa:2025-20 |
| By: | Andrea Chiavari; Sampreet Singh Goraya |
| Abstract: | We document a technological change in production technology biased towards intangible capital, such as computerized information and software, over other inputs in the last three decades. This has led to higher investment adjustment costs for firms. A general equilibrium firm dynamics model suggests that this can result in (i) increased firm size and concentration, (ii) changes in aggregate factor shares, and (iii) rise in dispersion of total factor productivity revenue coupled with declining aggregate productivity. This paper provides an alternative mechanism behind these macroeconomic changes in the US economy, emphasizing the efficient response of firms to changes in production technology. |
| Date: | 2025–04–08 |
| URL: | https://d.repec.org/n?u=RePEc:oxf:wpaper:1078 |
| By: | Hiroshi Kitamura; Noriaki Matsushima; Misato Sato; Wataru Tamura |
| Abstract: | We experimentally investigate exclusive-offer competition between two existing upstream firms. In theory, when upstream firms make exclusive offers to a downstream monopolist, both exclusion and non-exclusion can be equilibrium outcomes. By varying key parameters, we explore how bargaining power and product differentiation affect the likelihood of exclusion outcomes. We experimentally find that exclusion is more likely to be observed when the upstream firms have stronger bargaining power or when they produce more differentiated products; paradoxically, the higher upstream firms' profits from cooperatively offering unattractive exclusive contracts, the more likely they are to fall into intense exclusive-offer competition. |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:dpr:wpaper:1281 |
| By: | Hiroshi Kitamura; Noriaki Matsushima; Misato Sato; Wataru Tamura |
| Abstract: | This study constructs a model of exclusive-offer competition between two existing upstream firms. Under exclusive-offer competition, the upstream firm's profit depends on the rival's exclusive offer. If the rival makes an exclusive offer acceptable for the downstream firm, the upstream firm is excluded unless it succeeds in exclusion. Consequently, the upper bound of exclusive offers becomes higher than when one of the upstream firms is a potential entrant that cannot make any exclusive offer. Thus, the exclusion of the existing upstream firm can be an equilibrium outcome even in the case where the potential entrant is never excluded. |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:dpr:wpaper:1280 |
| By: | Qiaoyi Chen (Fudan University); Nicholas Ryan (Yale University); Daniel Yi Xu (Duke University) |
| Abstract: | We study carbon offsets sold by firms in China under the Clean Development Mechanism (CDM). We find that offset-selling firms, meant to cut carbon emissions, instead increase them by 49% after starting an offset project. In a model of firm investment decisions and offset review, we estimate that CDM firms increase emissions due to both the selection of higher-growth firms into projects (35 pp) and because offset projects themselves boost firm growth and therefore emissions (14 pp). The CDM reduces global surplus by causing damages from increased emissions four times greater than private gains from trade in the offset market. |
| Date: | 2025–03–18 |
| URL: | https://d.repec.org/n?u=RePEc:cwl:cwldpp:2434 |
| By: | Ernest Liu (Princeton University); Yukun Liu (Rochester University); Vladimir Smirnyagin (University of Virginia); Aleh Tsyvinski (Yale University) |
| Abstract: | We study the impact of supply chain disruptions on U.S. firms based on the universe of seaborne shipment-level import transactions from 2013 to 2023. The granularity of the data allows us to build an index of firm-level disruptions of international suppliers and introduce a comprehensive set of stylized facts for supply chain relationships in the cross-section of firms. We build a general equilibrium heterogeneous firms model with two types of capital stocksÑphysical and international supplier capitals. Accumulation of supplier capital is an important endogenous margin of adjustment, and limiting this ability substantially delays recovery, especially in financially constrained firms. |
| Date: | 2024–02–13 |
| URL: | https://d.repec.org/n?u=RePEc:cwl:cwldpp:2402r1 |