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| Tekijä: | Fluet, C. Phaneuf, L. |
| Otsikko: | Price adjustment costs and the effect of endogenous technique on price stickiness |
| Lehti: | European Economic Review
1997 : FEB, VOL. 41:2, p. 245-257 |
| Asiasana: | PRICES BUSINESS CYCLES MONOPOLY COMPETITION DEMAND COMPANIES |
| Kieli: | eng |
| Tiivistelmä: | In the paper, a monopolistic firm's pricing and choice of technique decisions is analyzed. In the analysis, the firm faces a random demand and is forced to incur a fixed menu cost to adjust its price to demand shocks. It is shown that price adjustment costs have the same effect as an increase in the variability of demand, in that the firm will choose a technique yielding a flatter short-term marginal cost curve. Making the production technique endogenous widens the range of demand shifts that will be accommodated with an unchanged price. That is, it allows for less price variation and more quantity variation when it is profitable to pay the menu cost and adjust the price. |
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