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Rationally inattentive seller: sales and discrete pricing
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SYSNO ASEP 0461428 Document Type J - Journal Article R&D Document Type Journal Article Subsidiary J Článek ve WOS Title Rationally inattentive seller: sales and discrete pricing Author(s) Matějka, Filip (NHU-N) RID Source Title Review of Economic Studies. - : Oxford University Press - ISSN 0034-6527
Roč. 83, č. 3 (2016), s. 1125-1155Number of pages 31 s. Language eng - English Country GB - United Kingdom Keywords rational inattention ; nominal rigidity ; sticky prices Subject RIV AH - Economics R&D Projects GPP402/11/P236 GA ČR - Czech Science Foundation (CSF) Institutional support NHU-N - RVO:67985998 UT WOS 000381273900008 EID SCOPUS 84991380391 DOI 10.1093/restud/rdv049 Annotation Prices tend to remain constant for a period of time and then jump. In the literature, this “rigidity” is usually interpreted to reflect a cost of adjusting prices. This article shows that price rigidity can alternatively reflect optimal price setting when there are no adjustment costs, namely, if the seller is rationally inattentive. The model generates non-trivial pricing patterns that are consistent with the data and that are hard to explain with the traditional adjustment-cost model. In particular, prices are adjusted frequently but move back and forth between a few given values, hazard functions are downward sloping, and responses to persistent shocks are sluggish. These results are obtained in a model that implements rational inattention without simplifying assumptions on the functional forms of the processed signals. Workplace Economics Institute Contact Tomáš Pavela, pavela@cerge-ei.cz, Tel.: 224 005 122 Year of Publishing 2017
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