Duopolistic competition and monetary policy

Journal of Monetary Economics, 2023, vol. 135, issue C, 70-85

Abstract: To consider the strategic pricing of duopolistic firms and its implications for monetary policy, this study constructs a tractable duopoly model with price stickiness. 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.

Keywords: Oligopoly; Monetary policy; Strategic complementarities; New Keynesian model (search for similar items in EconPapers)
JEL-codes: D43 E32 E52 (search for similar items in EconPapers)
Date: 2023
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Working Paper: Duopolistic Competition and Monetary Policy (2022)
Working Paper: Duopolistic competition and monetary policy (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:135:y:2023:i:c:p:70-85

DOI: 10.1016/j.jmoneco.2023.01.003

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