Cartel Stability, Mark-Up Cyclicality and Government Spending Multipliers

Lambertini, Luca ; Marattin, Luigi (2012) Cartel Stability, Mark-Up Cyclicality and Government Spending Multipliers. Bologna: Dipartimento di Scienze economiche DSE, p. 31. DOI 10.6092/unibo/amsacta/4196. In: Quaderni - Working Paper DSE (820). ISSN 2282-6483.
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Abstract

Mark-up cyclical behaviour is relevant in determining the size of government spending multiplier on output. While theoretical literature priviliged the counteryclical hypothesis, empirical evidence is far from being conclusive. Based on seminal Rotemberg and Saloner (1986) contribution, we build a theoretical framework based on Bertrand duopoly, stochastic demand and product differentiation, where the analysis of cartel stability under partial collusion points towards procyclical pricing. According to the intensity of marginal cost cyclicality, this can produce a procyclical mark up or - at least- render it less countercyclical than expected, with relevant effects on the transmission mechanism of government spending stimuli.

Abstract
Document type
Monograph (Working Paper)
Creators
CreatorsAffiliationORCID
Lambertini, Luca
Marattin, Luigi
Keywords
partial collusion, cyclical pricing
Subjects
ISSN
2282-6483
DOI
Deposit date
19 Mar 2015 09:28
Last modified
31 Mar 2015 13:38
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