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Endogenous Cycles and Menu Costs: A Dynamic Macroeconomic Model of Monopoly
Author(s) -
Ralf Kirsten
Publication year - 2002
Publication title -
metroeconomica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.256
H-Index - 29
eISSN - 1467-999X
pISSN - 0026-1386
DOI - 10.1111/1467-999x.00136
Subject(s) - economics , monopoly , microeconomics , welfare , econometrics , macroeconomics , market economy
We present a dynamic model of price setting in which price adjustments are costly for the monopolist. The general price level changes endogenously due to welfare changes. For the resulting two‐dimensional dynamical system the existence of a continuum of stationary points is proven. Furthermore, simulations show that endogenous cycles of output can occur.