Paralyzed by Fear: Rigid and Discrete Pricing Under Demand Uncertainty

• 成果类型: Article
• 署名作者: Ilut, Cosmin; Valchev, Rosen; Vincent, Nicolas
• 署名单位: Duke University; National Bureau of Economic Research; Boston College; Universite de Montreal; HEC Montreal
• 刊物名称: ECONOMETRICA
• ISSN/ISSBN: 0012-9682
• DOI: 10.3982/ECTA14234
• 发表日期: 2020
• 页码: 1899-1938
• 关键词: sticky prices; expected utility; propagation; INFORMATION; robust; curve; COSTS; RISK

摘要

We propose a new theory of price rigidity based on firms' Knightian uncertainty about their competitive environment. This uncertainty has two key implications. First, firms learn about the shape of their demand function from past observations of quantities sold. This learning gives rise to kinks in the expected profit function at previously observed prices, making those prices both sticky and more likely to reoccur. Second, uncertainty about the relationship between aggregate and industry-level inflation generates nominal rigidity. We prove the main insights analytically and quantify the effects of our mechanism. Our estimated quantitative model is consistent with a wide range of micro-level pricing facts that are typically challenging to match jointly. It also implies significantly more persistent monetary non-neutrality than in standard models, allowing it to generate large real effects from nominal shocks.