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Duopolistic competition and monetary policy

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  • Ueda, Kozo

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.

Suggested Citation

  • Ueda, Kozo, 2023. "Duopolistic competition and monetary policy," Journal of Monetary Economics, Elsevier, vol. 135(C), pages 70-85.
    • Handle: RePEc:eee:moneco:v:135:y:2023:i:c:p:70-85
    DOI: 10.1016/j.jmoneco.2023.01.003
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    More about this item

    Keywords

    Oligopoly; Monetary policy; Strategic complementarities; New Keynesian model;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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