This paper investigates the predictions of a simple optimizing model of nominal price rigidity for the dynamics of inflation. Taking as given the paths of nominal labor compensation and labor productivity to approximate the evolution of marginal costs, I determine the path of prices predicted by the solution of the firms’ optimal pricing problem. Model parameters are chosen to maximize the fit ...

Rising pharmaceutical prices, increasing demand for more effective innovative drugs and growing public outrage have heightened criticism of the pharmaceutical industry. The public debate has focused on drug prices and access. As a consequence, the patent system is being reexamined as an efficient mechanism for encouraging pharmaceutical innovation and drug development. We propose an alternative...

Competitive producers hold inventories to reduce costs of adjusting production and to reduce marketing costs by facilitating scheduling and avoiding stockouts. Using data for copper, heating oil, and lumber, I estimate these costs within a structural model of production, sales, and storage, and / study their implications for inventory and price behavior. Unlike earlier studies, this work focuse...

We develop and test a New Keynesian model of inflation dynamics based on the presence of idiosyncratic shocks to firms’ marginal costs. We show that if firms ignore economy-wide influences on their marginal costs, inflation will exhibit a greater degree of inertia than the conventional New Keynesian model suggests. Credible disinflationary policies are likely to be accompanied by recessions rat...

Compensation from the international community should be provided and take account of the opportunity costs of alternative uses of the land, the costs of administering and enforcing protection, and managing the transition. Research carried out for this report indicates that the opportunity cost of forest protection in 8 countries responsible for 70 per cent of emissions from land use could be ar...

For political and practical reasons, environmental regulations sometimes treat point source polluters, such as power plants, di¤erently from mobile source polluters, such as vehicles. This paper measures the extent of this regulatory asymmetry in the case of nitrogen oxides (NOx), the criteria air pollutant that has proven to be the most recalcitrant in the United States. We …nd signi…cant di¤e...