Why we introduce the intermediate good producers into RBC model? I am learning the RBC model and find some papers that use the intermediate good producers under the monopolistic competitive market. Could you tell me the benefit of this method? Thanks.
In the classic RBC model you don't need intermediate good producers. They are introduced, for instance, in the New Keynesian model so that firms have some amount of monopoly power and don't always have to price their goods at the marginal cost of production.