Rational inattention, multi-product firms and the neutrality of money

Ernesto Pasten and Raphael Schoenle

Journal of Monetary Economics, 2016, vol. 80, issue C, 1-16

Abstract: In a model where firms set prices under rational inattention we allow them to produce multiple goods. In addition to monetary shocks and firm-specific shocks, good-specific shocks affect firms, consistent with micro price data. When per-good expected losses in profits from inattention are held constant, monetary non-neutrality quickly vanishes as the number of goods per firm rises. This result is due to (1) economies of scope that arise naturally in the multi-product setting, where processing information is costly but using already internalized information is free, and (2) good-specific shocks.

Keywords: Rational inattention; Multi-product firms; Monetary non-neutrality (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (16)

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Related works:
Working Paper: Rational Inattention, Multi-Product Firms and the Neutrality of Money (2015)
Working Paper: Rational Inattention, Multi-Product Firms and the Neutrality of Money (2012)
Working Paper: Rational Inattention, Multi-Product Firms and the Neutrality of Money (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:80:y:2016:i:c:p:1-16

DOI: 10.1016/j.jmoneco.2016.04.004

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