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Buyer-Size Discounts and Inflation Dynamics

Author

Listed:
  • Mayumi Ojima

    (Bank of Japan)

  • Junnosuke Shino

    (Bank of Japan)

  • Kozo Ueda

    (Waseda University)

Abstract

This paper considers the macroeconomic effects of retailers' market concentra- tion and buyer-size discounts on inflation dynamics. During Japan's "lost decades," large retailers enhanced their market power, leading to increased exploitation of buyer-size discounts in procuring goods. We incorporate this effect into an other- wise standard New-Keynesian model. Calibrating to the Japanese economy during the lost decades, we find that despite a reduction in procurement cost, strength- ened buyer-size discounts did not cause deflation; rather, they caused inflation of 0.1% annually. This arose from an increase in the real wage due to the expansion of production.

Suggested Citation

  • Mayumi Ojima & Junnosuke Shino & Kozo Ueda, 2014. "Buyer-Size Discounts and Inflation Dynamics," UTokyo Price Project Working Paper Series 017, University of Tokyo, Graduate School of Economics.
  • Handle: RePEc:upd:utppwp:017
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