Year: 1993
Type: report
Abstract: We analyze the effect of inflation on the average output of monopolistic firms facing a small fixed cost of changing nominal prices. Using Taylor expansions, we derive a general closed-form solution for the slope of the long-run Phillips curve. This very simple, unifying formula allows us to evaluate and clarify the role of three key factors: the asymmetry of the profit function, the convexity of the demand function, and the discount rate. These partial equilibrium effects remain important components of any general equilibrium model with (s, S) pricing.
DOI: 10.3386/t0135
Authors: Roland Benabou, Jerzy Konieczny
Language: English
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W1536155201