Does state-dependent pricing imply coordination failure?
AbstractThe analysis in Ball and Romer  suggests that models with fixed costs of changing price may be rife with multiple equilibria; in their static model price adjustment is always characterized by strategic complementarity, a necessary condition for multiplicity. We extend Ball and Romer's analysis to a dynamic setting. In steady states of the dynamic model, we find only weak complementarity and no evidence of multiplicity, although nonexistence of symmetric steady state with pure strategies does arise in a small number of cases.
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Bibliographic InfoPaper provided by Federal Reserve Bank of Richmond in its series Working Paper with number 99-05.
Date of creation: 1999
Date of revision:
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