Behavioral sticky prices / Sérgio Rebelo, Miguel Santana and Pedro Teles
Contributor(s): Resource type: Ressourcentyp: Buch (Online)Book (Online)Language: English Series: Centre for Economic Policy Research. Discussion papers ; DP18884Publisher: London : Centre for Economic Policy Research, 04 March 2024Description: 1 Online-Ressource (circa 36 Seiten)Subject(s): Genre/Form: Online resources: Summary: We study a model where households make decisions according to a dual process framework widely used in cognitive psychology. System 1 uses effortless heuristics but is susceptible to biases and errors. System 2 uses mental effort to make more accurate decisions. Through their pricing behavior, monopolistic producers can influence whether households deploy Systems 1 or 2. The strategic use of this influence creates a new source of price inertia and provides a natural explanation for the ”rockets and feathers” phenomenon: prices rise quickly when costs increase but fall slowly when costs fall. Our model implies that price stability is not optimal.PPN: PPN: 1882892801Package identifier: Produktsigel: ZDB-1-CEPPNo physical items for this record