The Kinked Demand Curve And Price Rigidity
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The Kinked Demand Curve And Price Rigidity
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Author : Maarten Dossche
language : en
Publisher:
Release Date : 2010
The Kinked Demand Curve And Price Rigidity written by Maarten Dossche and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010 with categories.
We estimate the curvature of the demand curve for a wide range of products. We use an extension of Deaton and Muellbauers Almost Ideal Demand System and scanner data from a large euro area retailer. We find evidence that the overall price elasticity of demand is higher for price increases than for price decreases. However, the overall degree of curvature is one to two orders of magnitude smaller than the value economists usually impose. This suggests that the shape of the demand curve is unlikely to be the only source of real price rigidity.
A Kinked Demand Theory Of Price Rigidity
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Author : Stephane Dupraz
language : en
Publisher:
Release Date : 2018
A Kinked Demand Theory Of Price Rigidity written by Stephane Dupraz and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018 with categories.
I provide a microfounded theory for one of the oldest, but so far informal, explanations of price rigidity: the kinked demand curve theory. Assuming that some customers observe at no cost only the price of the store they happen to be at gives rise to a kink in firms' demand curves: a price increase above the market price repels more customers than a price decrease attracts. The kink in turn makes a range of prices consistent with equilibrium, but a selection criterion that captures firms' reluctance to be the first to change prices -- the adaptive rational-expectations criterion -- selects a unique equilibrium where prices stay constant for a long time. The kinked-demand theory is consistent with price-setters' account of price rigidity as arising from the customer's -- not the firm's -- side, and their account of their reluctance to make the first step in changing prices. The kinked-demand theory can be tested against menu-cost models in micro data: it predicts that prices should be more likely to change if they have recently changed, and that prices should be more flexible in markets where customers can more easily compare prices. At the macro level, the kinked-demand theory induces a trade-off between output and inflation that substantially differs from prominent theories of sticky prices: the Phillips curve is strongly convex but does not contain any (present or past) expectations of inflation, and is non-vertical in the long-run.
The Relative Rigidity Of Monopoly Pricing Classic Reprint
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Author : Julio J. Rotemberg
language : en
Publisher: Forgotten Books
Release Date : 2018-02-23
The Relative Rigidity Of Monopoly Pricing Classic Reprint written by Julio J. Rotemberg and has been published by Forgotten Books this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018-02-23 with Business & Economics categories.
Excerpt from The Relative Rigidity of Monopoly Pricing The relationship between industry structure and pricing is a major focus of Industrial Organization. One of the most striking facts to have emerged about this relationship is that monopolists tend to change their prices less frequently than tight oligopolies. Although the first evidence in this regard was presented by Stigler (1947) almost forty years ago, no theoretical explanations have been offered. The objective of this papergis to develop models capable of explaining these facts. Stigler's objective in comparing the relative rigidity of monopoly and dqoly prices was to test the kinked demand curve theory of Hall and Hitch (1939) and Sweezy Since the work of Gardiner Means (1935) seemed to show that concentrated industries exhibited greater price rigidity than their unconcentrated counterparts, the kinked demand curve was developed and embraced as providing a theoretical foundation for the rigidity of prices. It was widely regarded to be an implication of that theory that du0polists would not change their prices in response to small changes in their costs. About the Publisher Forgotten Books publishes hundreds of thousands of rare and classic books. Find more at www.forgottenbooks.com This book is a reproduction of an important historical work. Forgotten Books uses state-of-the-art technology to digitally reconstruct the work, preserving the original format whilst repairing imperfections present in the aged copy. In rare cases, an imperfection in the original, such as a blemish or missing page, may be replicated in our edition. We do, however, repair the vast majority of imperfections successfully; any imperfections that remain are intentionally left to preserve the state of such historical works.
The Kinked Demand Curve And The Total Approach
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Author : Alan Hochstein
language : en
Publisher:
Release Date : 1985
The Kinked Demand Curve And The Total Approach written by Alan Hochstein and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1985 with Demand functions (Economic theory) categories.
Price Rigidity In Imperfectly Competitive Markets
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Author : Steven Alan Sharpe
language : en
Publisher:
Release Date : 1987
Price Rigidity In Imperfectly Competitive Markets written by Steven Alan Sharpe and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1987 with Pricing categories.
The Kinked Demand Curve Revisited
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Author : Debappiya Sen
language : en
Publisher:
Release Date : 2005
The Kinked Demand Curve Revisited written by Debappiya Sen and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2005 with categories.
In a Stackelberg oligopoly with cost asymmetry and possibility of entry, the Stackelberg leader faces a kinked demand curve. For a robust interval of cost of the leader, the equilibrium price is rigid with respect to small changes in demand and costs of active firms.
Asking About Prices
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Author : Alan Blinder
language : en
Publisher: Russell Sage Foundation
Release Date : 1998-01-08
Asking About Prices written by Alan Blinder and has been published by Russell Sage Foundation this book supported file pdf, txt, epub, kindle and other format this book has been release on 1998-01-08 with Business & Economics categories.
Why do consumer prices and wages adjust so slowly to changes in market conditions? The rigidity or stickiness of price setting in business is central to Keynesian economic theory and a key to understanding how monetary policy works, yet economists have made little headway in determining why it occurs. Asking About Prices offers a groundbreaking empirical approach to a puzzle for which theories abound but facts are scarce. Leading economist Alan Blinder, along with co-authors Elie Canetti, David Lebow, and Jeremy B. Rudd, interviewed a national, multi-industry sample of 200 CEOs, company heads, and other corporate price setters to test the validity of twelve prominent theories of price stickiness. Using everyday language and pertinent scenarios, the carefully designed survey asked decisionmakers how prominently these theoretical concerns entered into their own attitudes and thought processes. Do businesses tend to view the costs of changing prices as prohibitive? Do they worry that lower prices will be equated with poorer quality goods? Are firms more likely to try alternate strategies to changing prices, such as warehousing excess inventory or improving their quality of service? To what extent are prices held in place by contractual agreements, or by invisible handshakes? Asking About Prices offers a gold mine of previously unavailable information. It affirms the widespread presence of price stickiness in American industry, and offers the only available guide to such business details as what fraction of goods are sold by fixed price contract, how often transactions involve repeat customers, and how and when firms review their prices. Some results are surprising: contrary to popular wisdom, prices do not increase more easily than they decrease, and firms do not appear to practice anticipatory pricing, even when they can foresee cost increases. Asking About Prices also offers a chapter-by-chapter review of the survey findings for each of the twelve theories of price stickiness. The authors determine which theories are most popular with actual price setters, how practices vary within different business sectors, across firms of different sizes, and so on. They also direct economists' attention toward a rationale for price stickiness that does not stem from conventional theory, namely a strong reluctance by firms to antagonize or inconvenience their customers. By illuminating how company executives actually think about price setting, Asking About Prices provides an elegant model of a valuable new approach to conducting economic research.
A Further Test Of The Structural Implications Of The Kinked Oligopoly Demand Curve
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Author : Edward T. Cope
language : en
Publisher:
Release Date : 1986
A Further Test Of The Structural Implications Of The Kinked Oligopoly Demand Curve written by Edward T. Cope and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1986 with categories.
The objective of this thesis is to conduct an empirical test of the kinked oligopoly demand theory. The kinked demand theory has received a from economists since its introduction in 1939. The theory has received support from subjective opinion surveys among businessmen, but no previous empirical test has been able to show evidence of the kink. The theory describes a reasonably intuitive notion that oligopolistic market rivals will match price decreases, but not increases. The kink is simply a bend or elbow in the demand curve at the point where this 'stickness' occurs. The bend in the curve also results in a discontinuity in the marginal revenue curve. This results in the implication that oligopoly prices will tend to be rigid in the face of moderate cost and demand changes. A second version of the kink describes a 'reflex kink' which produces relatively flexible oligopoly prices when industries are operating at, or close to, peak capacity. (Keywords: Economies; Economic analysis).
Imperfections And Behavior In Economic Organizations
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Author : Robert P. Gilles
language : en
Publisher: Springer Science & Business Media
Release Date : 1994-07-31
Imperfections And Behavior In Economic Organizations written by Robert P. Gilles and has been published by Springer Science & Business Media this book supported file pdf, txt, epub, kindle and other format this book has been release on 1994-07-31 with Business & Economics categories.
Imperfections and Behavior in Economic Organizations analyzes the organization of economic decision making in a contemporary setting. The contributors focus on two important aspects of this analysis. First, they address the issue of imperfect or incomplete information and communication in economic organizations and consider imperfections arising from the interaction of the market organization with its environment. Second, the issue of cooperation in a competitive environment is thoroughly analyzed and alternative social trade organizations are designed to dissipate the allocation problems that arise in these situations.
Real Rigidities And Nominal Price Changes
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Author : Peter J. Klenow
language : en
Publisher:
Release Date : 2016
Real Rigidities And Nominal Price Changes written by Peter J. Klenow and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.
Real rigidities can help to generate persistent effects of monetary policy shocks. We analyse an industry equilibrium model with two types of real rigidities: a 'micro' real rigidity from a kinked demand curve, and a 'macro' real rigidity due to sticky intermediate prices. We estimate key model parameters using micro data from the US CPI, which features big movements in relative prices within and across sectors. The micro real rigidity necessitates large idiosyncratic shocks to productivity. The macro real rigidity does not entail such large idiosyncratic shocks, and is consistent with the volatility of sectoral TFP growth.