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. We provide two possible explanations. The first is based on the presence of a small fixed cost of changing prices. The second, on small costs of discovering the optimal price. The incentive to change price for duopolists producing differentiated products exceeds that of a single monopolistic firm which produced the same tange of products as the duopoly.
|Date of creation:||Jun 1986|
|Publication status:||published as American Economic Review, Vol. 77, No. 5, December 1987, pp. 917-926.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
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- 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.
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- 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.
- Carlton, Dennis W, 1986. "The Rigidity of Prices," American Economic Review, American Economic Association, vol. 76(4), pages 637-658, September.
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- Simon, Julian L, 1969. "A Further Test of the Kinky Oligopoly Demand Curve," American Economic Review, American Economic Association, vol. 59(5), pages 971-975, December.
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