Monopolistic price setting and supply rigidities in a disequilibrium framework

Werner Smolny
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Werner Smolny: University of Konstanz, P.O. Box 5560, D-78434 Konstanz, GERMANY

Economic Theory, 1997, vol. 11, issue 1, 157-169

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

JEL-codes: D21 D42 D45 (search for similar items in EconPapers)
Date: 1997-11-17
Note: Received: May 17, 1995; revised version: October 13, 1996
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