Does State-Dependent Pricing Imply Coordination Failure?

47 Pages Posted: 26 Nov 2012

See all articles by A. John

A. John

Michigan State University

Alexander L. Wolman

Federal Reserve Bank of Richmond

Date Written: August 9, 1999

Abstract

The analysis in Ball and Romer [1991] suggests that models with fixed costs of changing price may be rife with multiple equilibria; in their static model price adjustment is always characterized by strategic complementarity, a necessary condition for multiplicity. We extend Ball and Romer's analysis to a dynamic setting. In steady states of the dynamic model, we find only weak complementarity and no evidence of multiplicity, although nonexistence of symmetric steady state with pure strategies does arise in a small number of cases.

Suggested Citation

John, A. and Wolman, Alexander L., Does State-Dependent Pricing Imply Coordination Failure? (August 9, 1999). FRB Richmond Working Paper No. 99-5. Available at SSRN: https://ssrn.com/abstract=2180960 or http://dx.doi.org/10.2139/ssrn.2180960

A. John

Michigan State University

Agriculture Hall
East Lansing, MI 48824-1122
United States

Alexander L. Wolman (Contact Author)

Federal Reserve Bank of Richmond ( email )

P.O. Box 27622
Richmond, VA 23261
United States

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