Price Competition in an Inflationary Environment

We study how inflation and deflation affect firms' ability to cooperate in an experimental Bertrand duopoly with differentiated products. We find that there is significantly less cooperation in the treatments with inflation and deflation compared to the no-inflation treatments. The difficulties to cooperate affect prices and welfare: Depending on the market structure, inflation and deflation lead to significantly lower (real) prices and higher welfare.

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Year of publication:	2013
Authors:	Duersch, Peter ; Eife, Thomas
Publisher:	Heidelberg : University of Heidelberg, Department of Economics
Subject:	Bertrand Duopoly \| Inflation \| Experiment \| Money Illusion

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Series:	Discussion Paper Series ; 547
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	10.11588/heidok.00015325 [DOI] 772985839 [GVK] hdl:10419/127357 [Handle] RePEc:awi:wpaper:0547 [RePEc]
Source:	EconStor

Persistent link: https://www.econbiz.de/10011422249