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Price rigidity and flexibility: recent theoretical developments

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  • Daniel Levy

    (Bar-Ilan University, Ramat-Gan, Israel)

Abstract

The price system, the adjustment of prices to changes in market conditions, is the primary mechanism by which markets function and by which the three most basic questions get answered: what to produce, how much to produce and for whom to produce. To the behaviour of price and price system, therefore, have fundamental implications for many key issues in microeconomics and industrial organization, as well as in macroeconomics and monetary economics. In microeconomics, managerial economics, and industrial organization, economists focus on the price system efficiency. In macroeconomics and monetary economics, economists focus on the extent to which nominal prices fail to adjust to changes in market conditions. Nominal price rigidities play a particularly important role in modern monetary economics and in the conduct of monetary policy because of their ability to explain short-run monetary non-neutrality. The behaviour of prices, and in particular the extent of their rigidity and flexibility, therefore, is of central importance in economics. This introductory essay briefly summarizes the eight studies of price rigidity that are included in this special issue. Copyright © 2007 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/mde.1331
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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Managerial and Decision Economics.

Volume (Year): 28 (2007)
Issue (Month): 6 ()
Pages: 523-530

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Handle: RePEc:wly:mgtdec:v:28:y:2007:i:6:p:523-530

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Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976

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  1. Akerlof, George A & Yellen, Janet L, 1985. "Can Small Deviations from Rationality Make Significant Differences to Economic Equilibria?," American Economic Review, American Economic Association, American Economic Association, vol. 75(4), pages 708-20, September.
  2. Akerlof, George A & Yellen, Janet L, 1985. "A Near-rational Model of the Business Cycle, with Wage and Price Intertia," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 100(5), pages 823-38, Supp..
  3. Mark J. Zbaracki & Mark Ritson & Daniel Levy & Shantanu Dutta & Mark Bergen, 2004. "Managerial and Customer Costs of Price Adjustment: Direct Evidence from Industrial Markets," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 514-533, May.
  4. Dutta, Shantanu, et al, 1999. "Menu Costs, Posted Prices, and Multiproduct Retailers," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 31(4), pages 683-703, November.
  5. Mankiw, N Gregory, 1985. "Small Menu Costs and Large Business Cycles: A Macroeconomic Model," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 100(2), pages 529-38, May.
  6. Gadi Fibich & Arieh Gavious & Oded Lowengart, 2007. "Optimal price promotion in the presence of asymmetric reference-price effects," Managerial and Decision Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 28(6), pages 569-577.
  7. Daniel Levy, 2007. "Price rigidity and flexibility: new empirical evidence," Managerial and Decision Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 28(7), pages 639-647.
  8. Daniel Levy & Frank Smets, 2010. "Price Setting and Price Adjustment in Some European Union Countries: Introduction to the Special Issue," Working Papers, Bar-Ilan University, Department of Economics 2010-22, Bar-Ilan University, Department of Economics.
  9. Andrew T. Young & Daniel Levy, 2013. "Explicit Evidence of an Implicit Contract," Working Papers, Bar-Ilan University, Department of Economics 2013-06, Bar-Ilan University, Department of Economics.
  10. N. Gregory Mankiw & Ricardo Reis, 2001. "Sticky Information Versus Sticky Prices: A Proposal to Replace the New Keynesian Phillips Curve," Harvard Institute of Economic Research Working Papers, Harvard - Institute of Economic Research 1922, Harvard - Institute of Economic Research.
  11. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, Elsevier, vol. 12(3), pages 383-398, September.
  12. Daniel Levy & Shantanu Dutta & Mark Bergen, 2002. "Heterogeneity in Price Rigidity: Evidence from a Case Study Using Micro-Level Data," Working Papers, Bar-Ilan University, Department of Economics 2002-09, Bar-Ilan University, Department of Economics.
  13. Gil S. Epstein, 2007. "Production, inventory and waiting time," Managerial and Decision Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 28(6), pages 579-589.
  14. Daniel Levy & Shantanu Dutta & Mark Bergen & Robert Venable, 1998. "Price adjustment at multiproduct retailers," Managerial and Decision Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 19(2), pages 81-120.
  15. Mankiw, N Gregory, 2001. "The Inexorable and Mysterious Tradeoff between Inflation and Unemployment," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 111(471), pages C45-61, May.
  16. Alexander L. Wolman, 2007. "The frequency and costs of individual price adjustment," Managerial and Decision Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 28(6), pages 531-552.
  17. Levy, Daniel, et al, 1997. "The Magnitude of Menu Costs: Direct Evidence from Large U.S. Supermarket Chains," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 112(3), pages 791-825, August.
  18. El-Agraa,Ali (ed.), 2007. "The European Union," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521874434.
  19. Wai-Yip Alex Ho & James Yetman, 2007. "The real effects of inflation in continuous versus discrete time sticky price models," Managerial and Decision Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 28(6), pages 633-638.
  20. Sheshinski, Eytan & Weiss, Yoram, 1977. "Inflation and Costs of Price Adjustment," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 44(2), pages 287-303, June.
  21. Ben S. Bernanke & Mark Gertler, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 9(4), pages 27-48, Fall.
  22. James Yetman, 2007. "Explaining hump-shaped inflation responses to monetary policy shocks," Managerial and Decision Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 28(6), pages 605-617.
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Cited by:
  1. Levy, Daniel, 2007. "Price Rigidity and Flexibility: New Empirical Evidence," MPRA Paper 2762, University Library of Munich, Germany.
  2. N. Gregory Mankiw & Ricardo Reis, 2001. "Sticky Information Versus Sticky Prices: A Proposal to Replace the New Keynesian Phillips Curve," NBER Working Papers 8290, National Bureau of Economic Research, Inc.
  3. Georg Müller & Mark Bergen & Shantanu Dutta & Daniel Levy, 2007. "Non-price rigidity and cost of adjustment," Managerial and Decision Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 28(7), pages 817-832.
  4. Daniel Levy & Frank Smets, 2010. "Price setting and price adjustment in some European Union Countries: introduction to the special issue," Managerial and Decision Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 31(2-3), pages 63-66.

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