Monopolistic price setting and supply rigidities in a disequilibrium framework

Werner Smolny

No 12, Discussion Papers from University of Konstanz, Center for International Labor Economics (CILE)

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

Keywords: monopolistic price setting; adjustment delays (search for similar items in EconPapers)
Date: 1994
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