Price Rigidity and Multi-Market Oligopoly
1993 (English)Report (Other academic)
This paper presents an explanation of imperfect adjustment of prices to current market conditions, based on multi-market oligopoly. In the regime where firms re-determine prices non-cooperatively in at least one market before market conditions are fully revealed, they increase the pre-determined prices more than otherwise because the increase induces the competitors' raising non-committed prices. Since all firms have the same incentive, prices and profits are higher through a "price-price spiral." Thus, oligopolistic firms are likely to agree in the pre-determined-price regime, where pre-determined prices do not fully reflect current conditions.
Place, publisher, year, edition, pages
Stockholm: IIES , 1993. , 46 p.
Seminar Paper / Institute for International Economic Studies, Stockholm University, ISSN 0347-8769 ; 545
IdentifiersURN: urn:nbn:se:su:diva-41864OAI: oai:DiVA.org:su-41864DiVA: diva2:338039
Published in connection with a visit at the IIES.2010-08-102010-08-102010-08-10