Article ID Journal Published Year Pages File Type
9549284 Economics Letters 2005 4 Pages PDF
Abstract
We develop a model in which even very small adjustment costs can lead to substantive price rigidity. We show that, facing a cost increasing shock, if firms expect competitors to keep prices unchanged, price rigidity may be a self-fulfilling prophesy.
Keywords
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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Can small menu costs explain sticky prices?
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