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Rockets and feathers: Understanding asymmetric pricing

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  • Mariano Tappata

Abstract

Prices rise like rockets but fall like feathers. This stylized fact of many markets is confirmed by many empirical studies. In this article, I develop a model with competitive firms and rational partially informed consumers where the asymmetric response to costs by firms emerges naturally. In contrast to public opinion and past work, collusion is not necessary to explain such a result.

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  • Mariano Tappata, 2009. "Rockets and feathers: Understanding asymmetric pricing," RAND Journal of Economics, RAND Corporation, vol. 40(4), pages 673-687, December.
    • Handle: RePEc:bla:randje:v:40:y:2009:i:4:p:673-687
    DOI: 10.1111/j.1756-2171.2009.00084.x
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