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On Endogenously Staggered Prices

  • Bhaskar, V

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 by The Review of Economic Studies Limited

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Article provided by Wiley Blackwell in its journal Review of Economic Studies.

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

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Handle: RePEc:bla:restud:v:69:y:2002:i:1:p:97-116
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  1. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 1998. "Sticky price models of the business cycle: can the contract multiplier solve the persistence problem?," Staff Report 217, Federal Reserve Bank of Minneapolis.
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  11. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
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