Number of the records: 1
Rigid pricing and rationally inattentive consumer
- 1.
SYSNO ASEP 0342782 Document Type J - Journal Article R&D Document Type Journal Article Subsidiary J Ostatní články Title Rigid pricing and rationally inattentive consumer Author(s) Matějka, Filip (NHU-N) RID Source Title CERGE-EI Working Paper Series - ISSN 1211-3298
Roč. 20, č. 2 (2010), s. 1-40Number of pages 40 s. Publication form www - www Language eng - English Country CZ - Czech Republic Keywords rational inattention ; nominal rigidity Subject RIV AH - Economics R&D Projects LC542 GA MŠMT - Ministry of Education, Youth and Sports (MEYS) CEZ AV0Z70850503 - NHU-N (2005-2011) Annotation This paper proposes a mechanism leading to rigid pricing as an optimal strategy. It applies a framework of rational inattention to study the pricing strategies of a monopolistic seller facing a consumer with limited information capacity. The consumer needs to process information about prices, while the seller is perfectly attentive. It turns out that the seller chooses to price discretely even for a continuous range of unit input costs, i.e. charges a finite set of different prices only. The price usually stays constant when unit input cost changes only a little. The seller does so to provide the consumer with easily observable prices and thus stimulate her to consume more. In the model's dynamic version, this mechanism implies that prices respond to cost shocks with a delay. Workplace Economics Institute Contact Tomáš Pavela, pavela@cerge-ei.cz, Tel.: 224 005 122 Year of Publishing 2011
Number of the records: 1