We study how inflation and deflation affect firms' ability to cooperate in an experimental Bertrand duopoly with differentiated products. We find that there is significantly less cooperation in the treatments with inflation and deflation compared to the no-inflation treatments. The difficulties to cooperate affect prices and welfare: Depending on the market structure, inflation and deflation lead to significantly lower (real) prices and higher welfare.
|Item Type:||Working paper|
|Series Name:||Discussion Paper Series / University of Heidelberg, Department of Economics|
|Date Deposited:||13 Aug 2013 08:26|
|Number of Pages:||28|
|Faculties / Institutes:||The Faculty of Economics and Social Studies > Alfred-Weber-Institut for Economics|
|Uncontrolled Keywords:||Bertrand Duopoly, Inflation, Experiment, Money Illusion|
|Schriftenreihe ID:||Discussion Paper Series / University of Heidelberg, Department of Economics|