An Optimising Model of Price Adjustment with Missing Information
نویسندگان
چکیده
An optimising model of price adjustment with missing information is developed where firms choose the speed of price adjustment to minimise the expected loss in disequilibrium. The loss is due to lost profits and the expected cost of failing to coordinate price changes with competitors. Assuming that a higher speed of price adjustment decreases the former and increases the latter, it is shown that higher steady state inflation reduces the markup. This follows as the loss in profits increases with inflation and firms respond by increasing the speed of adjustment. However, the fear of coordination failure restricts the increase in the speed of adjustment and the markup falls.
منابع مشابه
Assessing the Behavioral Reaction of Investors to the Price Change Using the Speed of Price Adjustment Approach to the General Information and Its Relation with Future Return
In Recent Decades, The Financial Sphere has entered a New Era of Contempt for Some of the Assumptions of Modern Economics and Finance. One of These Assumptions is the Rationale of the Investors, which has been Seriously Challenged and Is Now Being Strengthened by the Fact That Prices are Determined more by Attitudes and Psychological Factors than for Fundamental Variables and Therefore the Stud...
متن کاملAn Application of the Two-Regime Threshold Vector Error Correction Model to Analyze Asymmetric Price Transmission of Milk in Zanjan Province of Iran
In this paper asymmetric price transmission mechanism and nonlinear adjustment between producer and retail prices of milk were examined in Zanjan Province of Iran. For this purpose, a Two-Regime Threshold Vector Error Correction Model (TVECM) and a Sup-LM Test developed by Hansen and Seo (2002) were employed for checking presence of a threshold effect. Application of unit root tests indicated...
متن کاملCoordinating Orders in Three-echelon Supply Chain using price adjustment mechanism
Supply chain coordination has become a critical success factor for supply chain management (SCM). In the past few years, the researchers have widely emphasized that cooperation among supply chain (SC) firms is a key source of competitive advantage. This paper is focused on supply chain coordination from the perspective of inventory management. Li and Liu [1] developed a model for illustrating h...
متن کاملStage Life Testing with Missing Stage Information - an EM-Algorithm Approach
We consider a stage life testing model and assume that the information at which levels the failures occurred is not available. In order to find estimates for the lifetime distribution parameters, we propose an EM-algorithm approach which interprets the lack of knowledge about the stages as missing information. Furthermore, we illustrate the implementation difficulties caused by an increasing nu...
متن کاملNeutrality of the Regulated Price Shock on Price Indices When All Primary Factors’ Endowments Are Adjusted
The regulated price policy may be implemented for some products. It is generally implemented for some products such as electricity, natural gas, water and so on that are supplied as monopolist. The regulated price shock on these products may lead to an adjustment in the endowments of primary factors. The aim of this paper is to investigate the effects of a regulated price shock on price indices...
متن کامل