Price competition in an inflationary environment

Peter Duersch and Thomas Eife ()
Authors registered in the RePEc Author Service: Peter Dürsch

Journal of Monetary Economics, 2019, vol. 104, issue C, 48-66

Abstract: In an experimental study with price-setting firms we find that inflation significantly reduces real prices (by lowering price markups) and significantly raises welfare compared to the treatment with a constant overall price level. Money illusion and a reduced ability to collude in an environment with a constantly changing, i.e., increasing, price level drive this result. In a third treatment with deflation, collusion is somewhat reduced as well, but money illusion pushes prices up so that welfare is lower than under inflation.

Keywords: Inflation; Markups; Experiment; Money illusion; Cooperation (search for similar items in EconPapers)
JEL-codes: C92 D43 E31 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Price Competition in an Inflationary Environment (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:104:y:2019:i:c:p:48-66

DOI: 10.1016/j.jmoneco.2018.09.004

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