Inflation as Prisoner's Dilemma: The Case for Mandatory Wage-Price Controls

Shlomo Maital and Yael Benjamini
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Shlomo Maital: Princeton University
Yael Benjamini: Princeton University

No 511, Working Papers from Princeton University, Department of Economics, Industrial Relations Section.

Abstract: Behavior toward uncertain future inflation gives rise to large diffuse externalities which result in market failure and require introduction of legal restraints -- mandatory wage-price controls. Models of wage-profit conflict and consumer vs. consumer rivalry are set out in which individual rationality leads to collective ruin (the so-called Prisoner's Dilemma). Evidence from national sample surveys indicates broad-based support for controls, and suggests some people do perceive the externalities generated by inflation.

JEL-codes: L88 (search for similar items in EconPapers)
Date: 1979-11
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Persistent link: https://EconPapers.repec.org/RePEc:pri:indrel:131

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