NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Mordecai Kurz

Department of Economics
Stanford University
Stanford, CA 94305

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NBER Working Papers and Publications

August 1979A Strategic Theory of Inflation
w0379
A strategic mechanism of price adjustment is introduced to explain inflations in the U.S. during 1909-1974. The mechanism follows from our theory that when the profit rate is above a normal-target rate, competitive forces operate to lower prices while if the profit rate is below the target a correlated strategy among firms operates to generate a rise in prices as a strategy to improve profitability. The notion of "correlated strategy" is adopted from game theory. The mechanism may operate in harmony or against demand and the net effect is what we call the "basic inflation." Contrary to a-priori notions of positive association between inflation rates and profit rates, our theory proposes a critical test of a negative association between these variables. Such a relationship is in fact empiri...
1967Investment, Dividend, and External Finance Behavior of Firms
with Phoebus J. Dhrymes
in Determinants of Investment Behavior, Robert Ferber, editor
 
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