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On Endogenously Staggered Prices

V. Bhaskar
The Review of Economic Studies
Vol. 69, No. 1 (Jan., 2002), pp. 97-116
Published by: Oxford University Press
Stable URL: http://www.jstor.org/stable/2695954
Page Count: 20
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On Endogenously Staggered Prices
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Abstract

Taylor's model of staggered contracts is an influential explanation for nominal inertia and the persistent real effects of nominal shocks. However, in standard imperfect competition models, if agents are allowed to choose the timing of pricing decisions, they will typically choose to synchronize. This paper provides a simple model of imperfect competition which produces stable staggering. Our argument relies on strategic interaction at two levels-between firms within an industries, and across industries-and produces a continuum of staggered price equilibria. These equilibria are strict, and hence stable under a simple adaptive learning process.

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