Duopolistic Competition and Monetary Policy
No e167, Working Papers from Tokyo Center for Economic Research
This study constructs a tractable duopoly model with price stickiness to consider the strategic pricing of duopolistic firms and its implications for monetary policy. Dynamic strategic complementarity, in which an increase in a firm's price increases the optimal price set by the rival firm in the following periods, increases steady-state price and the real effect of monetary policy. However, when temporary sales arise as a mixed strategy, the real effect of monetary policy decreases considerably.
Pages: 34 pages
New Economics Papers: this item is included in nep-cwa, nep-mac and nep-mon
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Working Paper: Duopolistic competition and monetary policy (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:tcr:wpaper:e167
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