Excerpt from Monopolistic Price Adjustment and Aggregate Output
This paper presents a new attempt at building a model which accounts for the existence of fluctuations in aggregate output in response to nominal disturbances, like an unpredicted injection of money into the economy. Like Lucas' model it is an equilibrium model. Economic agents maximize their objective functions taking the prices set by the other agents as given. They make the best use of current information in the computation of facts about their current and future economic environment.
In fact, the producers, who in this model have market power, have fullinformation about the present. Namely, they know the prices charged by their suppliers, the price level, and the economy-wide level of nominal money balances. Furthermore they observe their demand and cost functions before they set their prices. These assumptions about the information available to producers sets this model apart from Lucas' and in my view constitute a theoretical advantage.
About the Publisher
Forgotten Books publishes hundreds of thousands of rare and classic books. Find more at www.forgottenbooks.com
This book is a reproduction of an important historical work. Forgotten Books uses state-of-the-art technology to digitally reconstruct the work, preserving the original format whilst repairing imperfections present in the aged copy. In rare cases, an imperfection in the original, such as a blemish or missing page, may be replicated in our edition. We do, however, repair the vast majority of imperfections successfully; any imperfections that remain are intentionally left to preserve the state of such historical works.show more