MONOPOLY POWER AND DOWNWARD PRICE RIGIDITY UNDER COSTLY PRICE ADJUSTMENT Journal Articles

abstract

• ABSTRACTA method of ‘backward deduction’ is used to analyse the decisions of a firm, setting price and quantity before demand observations are made, with the option to adjust price at a cost after demand is observed. It is shown for such a firm that the events of (1) downward price rigidity; (2) overproduction; and (3) a high degree of monopoly power are closely related. The paper distinguishes itself from the previous literature on costly price adjustment in its treatment of disequilibrium situations and focus on monopoly power in relation to price rigidity. The main results are obtained for a linear demand curve and a uniform demand distribution.

authors

• Balvers, Ronald

status

• published 

publication date

• April 1988

has subject area

• 14 Economics (FoR)
• Economics (Science Metrix)

published in

• Bulletin of Economic Research  Journal

keywords

• 38 Economics
• 3803 Economic Theory

Digital Object Identifier (DOI)

• 10.1111/j.1467-8586.1988.tb00258.x

start page

• 115

end page

• 131

volume

• 40

issue

• 2