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The Equilibrium and Optimal Timing of Price Changes / Laurence Ball, David Romer.
- Format:
- Book
- Author/Creator:
- Ball, Laurence.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w2412.
- NBER working paper series no. w2412
- Language:
- English
- Subjects (All):
- Equilibrium (Economics)--Mathematical models.
- Equilibrium (Economics).
- Pricing--Mathematical models.
- Pricing.
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 1987.
- Cambridge, Massachusetts : National Bureau of Economic Research, 1987.
- Summary:
- This paper studies the welfare properties of the equilibrium timing of price changes. Staggered price-setting has the advantage that it permits rapid adjustment to firm-specific shocks but the disadvantage that it causes price level inertia and therefore increases aggregate fluctuations. Because each firm ignores its contribution to inertia, staggering can be a stable equilibrium even if it is highly inefficient. In addition, there can be multiple equilibria in the timing of price changes; indeed, whenever there is an inefficient staggered equilibrium, there is also an efficient equilibrium with synchronized price-setting.
- Notes:
- Print version record
- October 1987.
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