Abstract
This paper considers an optimal pricing model in continuous time that combines state and time dependent elements usually examined separately in the literature. In this model we find that recessions and booms are of roughly equal amplitude, contrary to results in Ball and Mankiw (1994) and Conlon and Liu (1997). On the other hand, while the amplitudes of booms and recessions are similar, their lengths differ. Applying the intuition developed in Ball and Mankiw to our model indicates that firms raise prices less frequently during recessions but more frequently during booms, so price-setters respond to booms more quickly.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
