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

Alexei Alexandrov and Özlem Bedre-Defolie

Journal of Economic Theory, 2017, vol. 168, issue C, 44-54

Abstract: 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.

Keywords: LeChatelier principle; Cost passthrough; Multiproduct oligopoly (search for similar items in EconPapers)
JEL-codes: C72 D11 D43 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Working Paper: LeChatelier-Samuelson principle in games and pass-through of shocks (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:168:y:2017:i:c:p:44-54

DOI: 10.1016/j.jet.2016.11.006

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