Imperfectly Competitive Markets, Trade Unions and Inflation: Do Imperfectly Competitive Markets Transmit More Inflation Than Perfectly Competitive Ones? A Theoretical Appraisal

Abstract

In this paper we study the theoretical plausibility of the conjecture that inflation arises because imperfectly competitive markets (ICM in the sequel) translate cost pushes in large price increases. We define two different measures of inflation transmission. We compare these measures in several models of ICM and in perfectly competitive markets (PCM in the seque!). In each case we find a necessary and sufficient condition for an ICM to transmit more inflation -according to the two measures- than that transmitted by a PCM.