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Article
Market cycles for a non-storable product under adjustment costs
Economics Working Papers (2002–2016)
  • David A. Hennessy, Iowa State University
  • Harvey E. Lapan, Iowa State University
Document Type
Working Paper
Publication Date
2-1-2004
Working Paper Number
WP #04028, February 2004; Old working paper #12208
Abstract
When adjustment costs are present, cyclical preference and technology heterogeneities in a product’s markets induce cycles in production. We exploit cyclic and dihedral group invariances in an industry’s cost technology to describe these patterns. We show when equilibrium cyclical pricing and production patterns are ordered according to demand patterns. Our approach allows us to identify periods when prices may fall below unit costs, net of adjustment costs. Social welfare preferences over cyclical demand and supply heterogeneities are identified. We study the particulars of cycle dynamics when demand is linear and adjustment costs are quadratic. The analysis is developed for when external trade is impossible and when it is possible.
Disciplines
File Format
application/pdf
Length
39 pages
Citation Information
David A. Hennessy and Harvey E. Lapan. "Market cycles for a non-storable product under adjustment costs" (2004)
Available at: http://works.bepress.com/harvey-lapan/27/