Market power under income polarization

We study the reaction of a monopolistic firm to distributive shocks which l ead 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 oppos ite direction of market demand: in this respect, distributive shocks can pr ovide an explanation for countercyclical movements of the markup.