Can small menu costs explain sticky prices?

Arthur Fishman; Avi Simhon

doi:10.1016/j.econlet.2004.06.026

Can small menu costs explain sticky prices?

Arthur Fishman
, Avi Simhon

Research output: Contribution to journal › Article › peer-review

6 Scopus citations

Abstract

We develop a model in which even very small adjustment costs can lead to substantive price rigidity. We show that, facing a cost increasing shock, if firms expect competitors to keep prices unchanged, price rigidity may be a self-fulfilling prophesy.

Original language	English
Pages (from-to)	227-230
Number of pages	4
Journal	Economics Letters
Volume	87
Issue number	2
DOIs	https://doi.org/10.1016/j.econlet.2004.06.026
State	Published - May 2005
Externally published	Yes

Keywords

Coordination failure
Price rigidity
Search
Small menu costs

Access to Document

10.1016/j.econlet.2004.06.026

Cite this

@article{d4b16cff68cc44128ffaeac2227b20a1,

title = "Can small menu costs explain sticky prices?",

abstract = "We develop a model in which even very small adjustment costs can lead to substantive price rigidity. We show that, facing a cost increasing shock, if firms expect competitors to keep prices unchanged, price rigidity may be a self-fulfilling prophesy.",

keywords = "Coordination failure, Price rigidity, Search, Small menu costs",

author = "Arthur Fishman and Avi Simhon",

year = "2005",

month = may,

doi = "10.1016/j.econlet.2004.06.026",

language = "אנגלית",

volume = "87",

pages = "227--230",

journal = "Economics Letters",

issn = "0165-1765",