IDEAS home Printed from https://ideas.repec.org/a/oup/restud/v53y1986i2p283-292..html
   My bibliography  Save this article

Rational Expectations and Price Rigidity in a Monopolistically Competitive Market

Author

Listed:
  • Kiyohiko G. Nishimura

Abstract

This paper analyses monopolistically competitive markets under incomplete information, facing unanticipated disturbances. Firms determine their prices before they have information about other firms' prices, and form their expectations about the average price rationally. If the market becomes very competitive in the sense that the price elasticity of individual demand is close to infinity, then the average price is completely insensitive to short-run unanticipated disturbances. In the intermediate case, if (a) cost disturbances are uniform and (b) demand and cost disturbances are correlated, then the average price is sensitive to cost and insensitive to demand.

Suggested Citation

  • Kiyohiko G. Nishimura, 1986. "Rational Expectations and Price Rigidity in a Monopolistically Competitive Market," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 53(2), pages 283-292.
    • Handle: RePEc:oup:restud:v:53:y:1986:i:2:p:283-292.
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.2307/2297652
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Radoslaw Paluszynski & Pei Cheng Yu, 2023. "Commitment versus Flexibility and Sticky Prices: Evidence from Life Insurance," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 49, pages 99-122, July.
    2. Benassy, Jean-Pascal, 1993. "Nonclearing Markets: Microeconomic Concepts and Macroeconomic Applications," Journal of Economic Literature, American Economic Association, vol. 31(2), pages 732-761, June.
    3. Gottfries, Nils, 1999. "Markets Shares, Financial Constraints, and Pricing Behavior in the Export Market," Working Paper Series 1999:15, Uppsala University, Department of Economics.
    4. Ryo Kato & Tatsushi Okuda, 2017. "Market Concentration and Sectoral Inflation under Imperfect Common Knowledge," IMES Discussion Paper Series 17-E-11, Institute for Monetary and Economic Studies, Bank of Japan.
    5. Nishimura, Kiyohiko G., 1998. "Expectation heterogeneity and price sensitivity," European Economic Review, Elsevier, vol. 42(3-5), pages 619-629, May.
    6. Kiyohiko G. Nishimura, 2007. "Increased Diversity and Deepened Uncertainty: Policy Challenges in a Zero‐Inflation Economy," International Finance, Wiley Blackwell, vol. 10(3), pages 281-300, December.
    7. Radoslaw Paluszynski & Pei Cheng, 2019. "Pay What Your Dad Paid: Commitment and Price Rigidity in the Market for Life Insurance," Discussion Papers 2019-02, School of Economics, The University of New South Wales.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:restud:v:53:y:1986:i:2:p:283-292.. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://academic.oup.com/restud .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.