Market power under income polarization |
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| Authors: | Corrado Benassi Roberto Cellini Alessandra Chirco |
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| Affiliation: | (1) Present address: Department of Economics, University of Bologna, Piazza Scaravilli 2, I-40126 Bologna, Italy;(2) Present address: Faculty of Economics, University of Catania, Palazzo delle Scienze, Corso Italia 55, I-95129 Catania, Italy;(3) Present address: Faculty of Economics, University of Lecce, Ecotekne, I-73100 Lecce, Italy |
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| Abstract: | We study the reaction of a monopolistic firm to distributive shocks which lead to income polarization. We show that the movements in the set price and in the sold quantity depend on the served market share. In particular, we identify a region of parameters where the optimal markup moves in the opposite direction of market demand: in this respect, distributive shocks can provide an explanation for countercyclical movements of the markup. |
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| Keywords: | monopoly markup income polarization |
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