July  2018, 5(3): 189-201. doi: 10.3934/jdg.2018012

Imperfectly competitive markets, trade unions and inflation: Do imperfectly competitive markets transmit more inflation than perfectly competitive ones? A theoretical appraisal

Universidad Carlos Ⅲ, Madrid, Spain

Received  February 2018 Revised  March 2018 Published  May 2018

In this paper we study the theoretical plausibility of the conjecture that inflation arises because imperfectly competitive markets (ICM in the sequel) translate cost pushes in large price increases. We define two different measures of inflation transmission. We compared these measures in several models of ICM and in perfectly competitive markets (PCM in the sequel). In each case we find a necessary and sufficient condition for an ICM to transmit more inflation -according to the two measures-than that transmitted by a PCM.

Citation: Luis C. Corchón. Imperfectly competitive markets, trade unions and inflation: Do imperfectly competitive markets transmit more inflation than perfectly competitive ones? A theoretical appraisal. Journal of Dynamics & Games, 2018, 5 (3) : 189-201. doi: 10.3934/jdg.2018012
References:
[1]

J. BulowJ. Geanakoplos and P. Klemperer, Multimarket oligopoly: Strategic substitutes and complements, Journal of Political Economy, 93 (1985), 488-511.  doi: 10.1086/261312.  Google Scholar

[2]

D. Carlton, Chapter 15 of Handbood of Industrial Organization, (1989), 909-946. Google Scholar

[3]

A. Dixit and J. Stiglitz, Monopolistic competition and optimum productivity diversity, American Economic Review, 67 (1977), 297-308.   Google Scholar

[4]

O. Hart, A model of imperfect compeition with Keynesian features, Quarterly Journal of Economics, 97 (1982), 109-138.   Google Scholar

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J. Nash, The bargaining problem, Econometrica, 18 (1950), 155-162.  doi: 10.2307/1907266.  Google Scholar

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M. Salinger, Tobin's q, unioniziton and the concentration-profits relationship, Rand Journal of Economics, 15 (1984), 159-170.   Google Scholar

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S. Salop, Monopolistic competition with outside goods, The Bell Journal of Economics, 10 (1979), 141-156.  doi: 10.2307/3003323.  Google Scholar

[8]

T. Scitovsky, Market power and inflation, Econometrica, 45 (1978), 221-233.  doi: 10.2307/2553069.  Google Scholar

[9]

M. Spence, Product selection, fixed costs and monopolistic competition, Review of Economic Studies, 43 (1976), 217-235.  doi: 10.2307/2297319.  Google Scholar

[10]

P. A. Zaleski, Industry concentration and the transmission of cost-push inflation: evidence from the 1974 OPEC oil crises, Journal of Economics and Business, 44 (1992), 135-141.  doi: 10.1016/0148-6195(92)90012-Y.  Google Scholar

show all references

References:
[1]

J. BulowJ. Geanakoplos and P. Klemperer, Multimarket oligopoly: Strategic substitutes and complements, Journal of Political Economy, 93 (1985), 488-511.  doi: 10.1086/261312.  Google Scholar

[2]

D. Carlton, Chapter 15 of Handbood of Industrial Organization, (1989), 909-946. Google Scholar

[3]

A. Dixit and J. Stiglitz, Monopolistic competition and optimum productivity diversity, American Economic Review, 67 (1977), 297-308.   Google Scholar

[4]

O. Hart, A model of imperfect compeition with Keynesian features, Quarterly Journal of Economics, 97 (1982), 109-138.   Google Scholar

[5]

J. Nash, The bargaining problem, Econometrica, 18 (1950), 155-162.  doi: 10.2307/1907266.  Google Scholar

[6]

M. Salinger, Tobin's q, unioniziton and the concentration-profits relationship, Rand Journal of Economics, 15 (1984), 159-170.   Google Scholar

[7]

S. Salop, Monopolistic competition with outside goods, The Bell Journal of Economics, 10 (1979), 141-156.  doi: 10.2307/3003323.  Google Scholar

[8]

T. Scitovsky, Market power and inflation, Econometrica, 45 (1978), 221-233.  doi: 10.2307/2553069.  Google Scholar

[9]

M. Spence, Product selection, fixed costs and monopolistic competition, Review of Economic Studies, 43 (1976), 217-235.  doi: 10.2307/2297319.  Google Scholar

[10]

P. A. Zaleski, Industry concentration and the transmission of cost-push inflation: evidence from the 1974 OPEC oil crises, Journal of Economics and Business, 44 (1992), 135-141.  doi: 10.1016/0148-6195(92)90012-Y.  Google Scholar

Figure 1.  Inflationary Sensitivity of the Cournot Equilibrium Given n.
Figure 2.  Inflationary Elasticity of the Cournot Equilibrium Given n.
Figure 3.  Inflationary Elasticity of the Cournot Equilibrium with free entry.
Figure 4.  Theorem 3.1
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