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New Keynesian models of price setting under monopolistic competition involve two kinds of inefficiency: the price level is too high because firms ignore an aggregate demand externality, and when there are costs of changing prices, price stickiness may be an equilibrium response to changes in...
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behaviors of oligopolistic firms. In this study, we construct a tractable Hotelling duopoly model with price stickiness to …-Stiglitz model, but the difference is not large. (3) A duopoly model with heterogeneous transport costs can explain the existence of …
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