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Price Adjustment with Price Conjectures

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Author Info
Michael Olive

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Abstract

We derive a measure of firm speed of price adjustment that is directly inversely related to market power and compare this to the measure derived by Martin (1993). However, both measures are incorrect when firms have price conjectural variations. This is because Taylor expansions of the demand function implicitly assume that firms influence the level of competing prices in a way that is consistent with their conjectures

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Paper provided by Econometric Society in its series Econometric Society 2004 Australasian Meetings with number 131.

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Date of creation: 11 Aug 2004
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Handle: RePEc:ecm:ausm04:131

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Related research
Keywords: Price adjustment market power conjectural variations

Find related papers by JEL classification:
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure

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References listed on IDEAS
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  1. Yetman, James, 2003. "Fixed prices versus predetermined prices and the equilibrium probability of price adjustment," Economics Letters, Elsevier, vol. 80(3), pages 421-427, September. [Downloadable!] (restricted)
  2. Martin, Christopher, 1993. "Price adjustment and market structure," Economics Letters, Elsevier, vol. 41(2), pages 139-143. [Downloadable!] (restricted)
  3. Kraft, Kornelius, 1995. "Determinants of Price Adjustment," Applied Economics, Taylor and Francis Journals, vol. 27(6), pages 501-07, June.
  4. Dornbusch, Rudiger, 1987. "Exchange Rates and Prices," American Economic Review, American Economic Association, vol. 77(1), pages 93-106, March.
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  5. Kenneth Kasa, 1998. "Identifying the source of dynamics in disaggregated import data," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 13(3), pages 305-320. [Downloadable!]
  6. Rotemberg, Julio J, 1982. "Sticky Prices in the United States," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1187-1211, December. [Downloadable!] (restricted)
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