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On Endogenously Staggered Prices

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  • V. Bhaskar

Abstract

Taylor's model of staggered contracts is an influential explanation for nominal inertia and the persistent real effects of nominal shocks. However, in standard imperfect competition models, if agents are allowed to choose the timing of pricing decisions, they will typically choose to synchronize. This paper provides a simple model of imperfect competition which produces stable staggering. Our argument relies on strategic interaction at two levels—between firms within an industries, and across industries—and produces a continuum of staggered price equilibria. These equilibria are strict, and hence stable under a simple adaptive learning process. Copyright 2002, Wiley-Blackwell.

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File URL: http://hdl.handle.net/10.1111/1467-937X.00199
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Bibliographic Info

Article provided by Oxford University Press in its journal The Review of Economic Studies.

Volume (Year): 69 (2002)
Issue (Month): 1 ()
Pages: 97-116

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Handle: RePEc:oup:restud:v:69:y:2002:i:1:p:97-116

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  1. Laurence Ball & Stephen G. Cecchetti, 1986. "Imperfect information and staggered price setting," Research Working Paper 86-08, Federal Reserve Bank of Kansas City.
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  8. De Fraja, Giovanni, 1993. "Staggered vs. synchronised wage setting in oligopoly," European Economic Review, Elsevier, vol. 37(8), pages 1507-1522, December.
  9. Caminal, R., 1988. "Inflation And Optimal Price Adjustment Under Monopolistic Competition," UFAE and IAE Working Papers 90.88, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
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  12. Louis Phaneuf, 1990. "Wage Contracts and the Unit Root Hypothesis," Canadian Journal of Economics, Canadian Economics Association, vol. 23(3), pages 580-92, August.
  13. Tsiddon, Daniel, 1993. "The (Mis)Behaviour of the Aggregate Price Level," Review of Economic Studies, Wiley Blackwell, vol. 60(4), pages 889-902, October.
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  15. Taylor, John B, 1979. "Staggered Wage Setting in a Macro Model," American Economic Review, American Economic Association, vol. 69(2), pages 108-13, May.
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