Cartel Stability, Mark-Up Cyclicality and Government Spending Multipliers
نویسندگان
چکیده
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 di¤erentiation, 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 e¤ects on the transmission mechanism of government spending stimuli. JEL Codes: C73, L13
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