University of Tasmania
Browse

File(s) under permanent embargo

Multi-product firms and increasing marginal costs

journal contribution
posted on 2023-05-21, 03:05 authored by Oscar PavlovOscar Pavlov
Recent literature has addressed how product creation amplifies economic fluctuations via the love of variety. Yet, the empirical evidence on variety effects is sparse. The current paper demonstrates that decreasing returns in the variety-level production technology, which leads to increasing marginal costs, similarly amplify business cycles. Product scope expansions reduce marginal costs and firms have an incentive to produce multiple products even if the variety effects are entirely absent. The efficiency gains from adjusting product scopes makes the economy more susceptible to sunspot equilibria. The indeterminate model is estimated via Bayesian methods and data favors the multi-product structure with animal spirits explaining a significant fraction of U.S. business cycles.

History

Publication title

Journal of Economic Dynamics and Control

Volume

133

Article number

104239

Number

104239

Pagination

104239

ISSN

0165-1889

Department/School

TSBE

Publisher

Elsevier Science Bv

Place of publication

Po Box 211, Amsterdam, Netherlands, 1000 Ae

Rights statement

© 2021 Elsevier B.V. All rights reserved.

Repository Status

  • Restricted

Socio-economic Objectives

Macroeconomics not elsewhere classified

Usage metrics

    University Of Tasmania

    Exports

    RefWorks
    BibTeX
    Ref. manager
    Endnote
    DataCite
    NLM
    DC