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LeChatelier–Samuelson principle in games and pass-through of shocks

Listed author(s):
  • Alexandrov, Alexei
  • Bedre-Defolie, Özlem
Registered author(s):

    The LeChatelier–Samuelson principle states that, as a reaction to a shock, an agent's short-run adjustment of an affected action is smaller than its long-run adjustment (when the agent can also adjust other related actions). We extend the principle to strategic environments where the long-run adjustment also accounts for other players adjusting their strategies. We show that the principle holds for supermodular games (strategic complements) satisfying monotone comparative statics and provide sufficient conditions for the principle to hold in games of strategic substitutes/heterogeneity. We discuss the principle's implications for cost pass-through of multiproduct firms.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0022053116301077
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    Article provided by Elsevier in its journal Journal of Economic Theory.

    Volume (Year): 168 (2017)
    Issue (Month): C ()
    Pages: 44-54

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    Handle: RePEc:eee:jetheo:v:168:y:2017:i:c:p:44-54
    DOI: 10.1016/j.jet.2016.11.006
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622869

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