Price Setting with Menu Cost for Multi-Product Firms

@article{lvarez2012PriceSW,
  title={Price Setting with Menu Cost for Multi-Product Firms},
  author={F. {\'A}lvarez and F. Lippi},
  journal={NBER Working Paper Series},
  year={2012}
}
We model the decisions of a multi-product firm that faces a fixed "menu" cost: once it is paid, the firm can adjust the price of all its products. We characterize analytically the steady state firm's decisions in terms of the structural parameters: the variability of the flexible prices, the curvature of the profit function, the size of the menu cost, and the number of products sold. We provide expressions for the steady state frequency of adjustment, the hazard rate of price adjustments, and… Expand
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