A Signalling Model of Nominal Price Inertia

Dominique Demougin (demougin@wiwi.uni-kl.de) and Arthur Fishman

No 275467, Foerder Institute for Economic Research Working Papers from Tel-Aviv University > Foerder Institute for Economic Research

Abstract: We present a signalling model which ascribes real effects to nominal disturbances. The market structure is characterized by imperfect information about prices which in the absence of aggregate informational asymmetries grants individual sellers monopoly status as in Diamond (1971). In addition, agents must incur an arbitrarily small cost to become perfectly informed about an aggregate nominal shock. If a seller has incurred this cost, its buyers may costlessly infer its private aggregate information from its nominal price. The solution of this signalling game specifies a set of sellers which separate and another Which pools and thus exhibits price inertia. The aggregate price level lies below the separating and above the pooling price.

Keywords: Financial; Economics (search for similar items in EconPapers)
Pages: 34
Date: 1989-05
References: Add references at CitEc
Citations:

Downloads: (external link)
https://ageconsearch.umn.edu/record/275467/files/TEL-AVIV-FSWP-144.pdf (application/pdf)

Related works:
Working Paper: A SIGNALLING MODEL OF NOMINAL PRICE INERTIA (1989)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:isfiwp:275467

DOI: 10.22004/ag.econ.275467

Access Statistics for this paper

More papers in Foerder Institute for Economic Research Working Papers from Tel-Aviv University > Foerder Institute for Economic Research Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search (aesearch@umn.edu).