Price Rigidities and the Market Process

Abstract

Paper deals with the role of price rigidities in the market process and monetary policy. The costs of price adjustment are inherent in the nature of entrepreneurial behaviour on the market. If price‐setting is based on the decision of actors on a free market, then it is based on the knowledge of dispersed information which cannot be known to any authority in its entirety. This fact takes us to logically the conclusion that a central authority cannot have a clear idea how prices correspond to preferences or the scarcity of resources.

Keywords: price rigidites, market process, monentary policy

JEL Classification: E31, E51