Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/159659 
Year of Publication: 
2012
Series/Report no.: 
Quaderni - Working Paper DSE No. 820
Publisher: 
Alma Mater Studiorum - Università di Bologna, Dipartimento di Scienze Economiche (DSE), Bologna
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.
JEL: 
C73
L13
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc Logo
Document Type: 
Working Paper

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