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Price Stickiness under Stochastic Demand

Bulletin of Applied Economics, 2020-01, Vol.7 (2), p.109

2020. This work is published under https://creativecommons.org/licenses/by/4.0/ (the “License”). Notwithstanding the ProQuest Terms and Conditions, you may use this content in accordance with the terms of the License. ;ISSN: 2056-3728 ;EISSN: 2056-3736 ;DOI: 10.47260/bae/728

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  • Title:
    Price Stickiness under Stochastic Demand
  • Author: Sheng-Yeh ; Wu ; Guan-Ru ; Chen
  • Is Part Of: Bulletin of Applied Economics, 2020-01, Vol.7 (2), p.109
  • Description: This study develops a two-period model in which the manufacturer determines a price floor and sets production output prior to resolution of uncertainty. The closer the distance between the minimum price and the high-demand-state price, the higher the degree of price rigidity. Solving for the minimum resale price and production output, the model indicates that asymmetric price transmission could be a characteristic of competitive markets. The retail price in a highly concentrated retail market might be lower than that in a retail market with fierce competition. The relationship between price adjustments and the market competition suggests that the reason underlying price rigidity should be considered while formulating the antitrust and monetary policies.
  • Publisher: London: Bulletin of Applied Economics
  • Language: English
  • Identifier: ISSN: 2056-3728
    EISSN: 2056-3736
    DOI: 10.47260/bae/728
  • Source: ProQuest Central
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