Per Svejstrup Hansen

Frequent price changes under menu costs

Abstract This paper investigates the effect of uncertainty on a single firms pricing behaviour in a dynamic menu cost model that results in (S,s)-rules where the price is fixed inside a band. It will be demonstrated that even though the band of inaction widens in response to increased uncertainty, the price may be changed more frequent in the short run, and in the long run it definitely will. Hence, observing frequent price changes is not necessarily inconsistent with a firm operating under menu costs. This paper relies on an article by Dixit (1991), (Review of Economic studies, 58, 141–151), but it offers a different solution technique. In particular, the solution of the model will be derived explicitly, unlike Dixit where approximations are resorted to.

Asymmetric adjustment in symmetric duopoly

Abstract Adjustments to unanticipated demand shocks in a symmetric, differentiated Bertrand duopoly are analysed. Asymmetric adjustment may arise even when adjustment costs are negligible or absent: In some equilibria only one firm adjusts to negative shocks, while both firms adjust to positive shocks.

Permanent effects of monetary policy in a dynamic menu cost model

Abstract This paper investigates whether a systematic monetary policy can affect output in a dynamic menu cost model that results in (S, s) price rules. It will be shown that monetary policy potentially can affect output, not only in the short run but also with regard to long-run average output. Even though the policy rule is fully known by the rational firm, perfectly anticipated monetary policy intervention may have a permanent real effect in the long run.

Trade Liberalization and the Degree of Competition in International Duopoly

This paper analyzes how a reduction in trade costs influences the possibility for firms to engage in international cartels, and hence how trade liberalization affects the degree of competition. We consider a particular intra‐industry trade model amended to allow for firms producing differentiated products. Our main finding is that trade liberalization may have an anti‐competitive effect. We find that there is no unique relation between a reduction in trade costs and the degree of competition. When products are differentiated, a lowering of trade costs is pro‐competitive if trade costs are initially high, but anti‐competitive if trade costs initially are low. Hence, trade policy is not necessarily a substitute for competition policy.

Asymmetric Adjustment in Menu Cost Duopoly

Contrary to existing menu cost models we assume oligopolistic interaction. Symmetric duopoly may lead to asymmetric adjustment even when menu costs are negligible: In some equilibria only one Orm adjusts to negative shocks, while both Orms adjust to positive shocks.

Quantity Adjustment Costs and Price Rigidity

An analog computer simulates and/or determines on a real time basis the normalized fuel consumption of a ships powerplant. A plurality of powerplant parameters are transformed into a form (1+/- DELTA p i), and normalized fuel rate is computed by displaying a linearly combined sum of weighted replicas of signals embodying the several p is.

Macroeconomic Framework Conditions and the Management of Research and Development in the Nordic Countries

Research and development are often singled out as one of the key drivers of growth in the Nordic economies. However, there appears to be only limited knowledge about how the framework conditions fo ...