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Inflation as Prisoner's Dilemma: The Case for Mandatory Wage-Price Controls

Author

Listed:
  • Shlomo Maital

    (Princeton University)

  • Yael Benjamini

    (Princeton University)

Abstract

Behavior toward uncertain future inflation gives rise to large diffuse externalities which result in market failure and require introduction of legal restraints -- mandatory wage-price controls. Models of wage-profit conflict and consumer vs. consumer rivalry are set out in which individual rationality leads to collective ruin (the so-called Prisoner's Dilemma). Evidence from national sample surveys indicates broad-based support for controls, and suggests some people do perceive the externalities generated by inflation.

Suggested Citation

  • Shlomo Maital & Yael Benjamini, 1979. "Inflation as Prisoner's Dilemma: The Case for Mandatory Wage-Price Controls," Working Papers 511, Princeton University, Department of Economics, Industrial Relations Section..
    • Handle: RePEc:pri:indrel:131
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    JEL classification:

    • L88 - Industrial Organization - - Industry Studies: Services - - - Government Policy

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