Monopolistic competition, relative prices, and output adjustment in the open economy

Joshua Aizenman

doi:10.1016/0261-5606(89)90011-9

Monopolistic competition, relative prices, and output adjustment in the open economy

Joshua Aizenman

Research output: Contribution to journal › Article › peer-review

8 Scopus citations

Abstract

This paper explains price and output dynamics in an open economy characterized by a monopolistic competitive market structure in which pricing decisions incur costs. This leads producers to pre-set the price path for several periods. The paper derives an optimal pricing rule, including the optimal pre-setting horizon. It does so for a rational expectation equilibrium, characterized by staggered, unsynchronized price setting, for which the degree of staggering is endogenously determined.

Original language	English
Pages (from-to)	5-28
Number of pages	24
Journal	Journal of International Money and Finance
Volume	8
Issue number	1
DOIs	https://doi.org/10.1016/0261-5606(89)90011-9
State	Published - 1 Jan 1989
Externally published	Yes

ASJC Scopus subject areas

Finance
Economics and Econometrics

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10.1016/0261-5606(89)90011-9

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AB - This paper explains price and output dynamics in an open economy characterized by a monopolistic competitive market structure in which pricing decisions incur costs. This leads producers to pre-set the price path for several periods. The paper derives an optimal pricing rule, including the optimal pre-setting horizon. It does so for a rational expectation equilibrium, characterized by staggered, unsynchronized price setting, for which the degree of staggering is endogenously determined.

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Monopolistic competition, relative prices, and output adjustment in the open economy

Abstract

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