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IMPERFECT INFORMATION AND PRICE RIGIDITY
Author(s) -
KLING ARNOLD
Publication year - 1982
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.1982.tb01147.x
Subject(s) - disequilibrium , economics , imperfect , perfect information , rigidity (electromagnetism) , econometrics , microeconomics , empirical evidence , mathematical economics , medicine , philosophy , linguistics , structural engineering , engineering , ophthalmology , epistemology
The purpose of this paper is to present a microeconomic model of pricing behavior that is consistent with macroeconomic theory and evidence. The essential ingredient in the model is the hypothesis that imperfect information implies that firms face kinked demand curves. I provide a detailed analysis of this hypothesis and develop its empirical implications. The model provides a microeconomic rationale for the price stickiness assumed in disequilibrium macroeconomic models.