Chen, G;
Korpeoglu, CG;
Spear, SE;
(2017)
Price stickiness and markup variations in market games.
Journal of Mathematical Economics
, 72
pp. 95-103.
10.1016/j.jmateco.2017.07.003.
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Abstract
In this paper, we show that the Shapley–Shubik market game model with production naturally generates an equilibration mechanism that can accommodate price stickiness arising from strategic interactions of firms. Unlike New Keynesian models that show similar price stickiness results, the market game model does not require enforcing menu costs or other additional restraints on price adjustment mechanisms in order to generate price stickiness. As such, we suggest that the market game model can provide a good micro-foundation for macroeconomic analysis. We then explicitly show the relationship between a typical firm’s markup of price over marginal cost and its market share.
| Type: | Article |
|---|---|
| Title: | Price stickiness and markup variations in market games |
| Open access status: | An open access version is available from UCL Discovery |
| DOI: | 10.1016/j.jmateco.2017.07.003 |
| Publisher version: | https://doi.org/10.1016/j.jmateco.2017.07.003 |
| Language: | English |
| Additional information: | This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions. |
| Keywords: | General Equilibrium, Market Game, Price Rigidity |
| UCL classification: | UCL UCL > Provost and Vice Provost Offices > UCL BEAMS UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science > UCL School of Management |
| URI: | https://discovery.ucl.ac.uk/id/eprint/10050646 |
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