The Relative Rigidity of Monopoly Pricing
This paper seeks to explain why monopolies keep their nominal prices constant for longer periods than do tight oligopolies. The authors show that cost changes create a larger incentive for duopolists to change their prices, while demand changes tend to have a greater effect on a monopolist. When both costs and demand are affected by small changes in the overall price level, the cost effect dominates. In the presence of a small fixed cost of changing prices, therefore, duopolists change their prices in response to smaller perturbations in underlying conditions. Copyright 1987 by American Economic Association.
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|Date of creation:||Apr 1986|
|Date of revision:|
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References listed on IDEAS
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- Carlton, Dennis W, 1986.
"The Rigidity of Prices,"
American Economic Review,
American Economic Association, vol. 76(4), pages 637-58, September.
- Olivier J. Blanchard & Nobuhiro Kiyotaki, 1985. "Monopolistic Competition, Aggregate Externalities and real Effects of Nominal Money," Working papers 401, Massachusetts Institute of Technology (MIT), Department of Economics.
- 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.
- Olivier J. Blanchard & Nobuhiro Kiyotaki, 1985. "Monopolistic Competition, Aggregate Demand Externalities and Real Effects of Nominal Money," NBER Working Papers 1770, National Bureau of Economic Research, Inc.
- George A. Akerlof & Janet L. Yellen, 1985. "A Near-Rational Model of the Business Cycle, with Wage and Price Inertia," The Quarterly Journal of Economics, Oxford University Press, vol. 100(Supplemen), pages 823-838.
- Eytan Sheshinski & Yoram Weiss, 1977. "Inflation and Costs of Price Adjustment," Review of Economic Studies, Oxford University Press, vol. 44(2), pages 287-303.
- Simon, Julian L, 1969. "A Further Test of the Kinky Oligopoly Demand Curve," American Economic Review, American Economic Association, vol. 59(5), pages 971-75, December.
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