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Monopolistic price setting and supply rigidities in a disequilibrium framework

Author

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  • Werner Smolny

    (University of Konstanz, P.O. Box 5560, D-78434 Konstanz, GERMANY)

Abstract

A model of the firm with a delayed adjustment of prices and employment is analyzed. Prices and employment are determined under uncertainty about the location of the demand curve. Three models are distinguished: price setting with predetermined supply, employment determination with pre-determined prices, and a simultaneous price and employment determination. It is shown that many of the results of the deterministic case can be transfered to the stochastic set-up. The deterministic model is included as a special case. However, the model allows for supply rigidities and labour hoarding and permits the analysis of price adjustment.

Suggested Citation

  • Werner Smolny, 1997. "Monopolistic price setting and supply rigidities in a disequilibrium framework," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 11(1), pages 157-169.
    • Handle: RePEc:spr:joecth:v:11:y:1997:i:1:p:157-169
    Note: Received: May 17, 1995; revised version: October 13, 1996
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    More about this item

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D45 - Microeconomics - - Market Structure, Pricing, and Design - - - Rationing; Licensing

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