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| Author: | Caplin, A. Leahy, J. |
| Title: | Aggregation and optimization with state-dependent pricing |
| Journal: | Econometrica
1997 : MAY, VOL. 65:3, p. 601-625 |
| Index terms: | OPTIMIZATION PRICING STRATEGIC PLANNING |
| Language: | eng |
| Abstract: | This paper takes steps towards integrating the literature on optimal state-dependent strategies with the literature on the aggregation of such rules. Generally the movements of aggregates are taken as given when examined the individual's problem in isolation. The feedback between individual optimization and the behavior of the economy as a whole has been ignored in former studies. In this paper a model is developed in which it is possible to study optimal state-dependent pricing in combination with an endogenously derived stochastic path of the aggregate price level. The model is developed in the context of price dynamics. |
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