scholarly journals Consumer Imperfect Information and Endogenous Price Rigidity

2020 ◽  
Vol 12 (2) ◽  
pp. 94-123
Author(s):  
Jean-Paul L’Huillier
Keyword(s):  
Differential Equation ◽  
Information Diffusion ◽  
Imperfect Information ◽  
Price Rigidity ◽  
Monetary Shocks ◽  
Price Rigidities ◽  
Endogenous Information ◽  
Nonlinear Learning

This paper studies the propagation of monetary shocks in an economy featuring a strategic microfoundation for price rigidities. Following an aggregate shock to money, most consumers are initially uninformed. The market for goods is decentralized. Firms are better off delaying the adjustment of prices until enough consumers learn. At the same time, consumers learn from firms that have adjusted prices. The implied endogenous information diffusion follows a Bernoulli differential equation, implying a nonlinear path of learning. Nonlinear learning implies hump-shaped dynamics of output and inflation. A quantitative exercise suggests that these dynamics can be sizable and persistent. (JEL D11, D21, D40, D82, E23, E31)

scholarly journals Crises and Prices: Information Aggregation, Multiplicity, and Volatility

2006 ◽  
Vol 96 (5) ◽  
pp. 1720-1736 ◽  
Author(s):  
George-Marios Angeletos ◽  
Iván Werning
Keyword(s):  
Private Information ◽  
Imperfect Information ◽  
Asset Price ◽  
Information Aggregation ◽  
Sources Of Information ◽  
Noisy Signal ◽  
Small Noise ◽  
Endogenous Information ◽  
Role Of Information

Crises are volatile times when endogenous sources of information are closely monitored. We study the role of information in crises by introducing a financial market in a coordination game with imperfect information. The asset price aggregates dispersed private information acting as a public noisy signal. In contrast to the case with exogenous information, our main result is that uniqueness may not obtain as a perturbation from perfect information: multiplicity is ensured with small noise. In addition, we show that: (a) multiplicity may emerge in the financial price itself; (b) less noise may contribute toward nonfundamental volatility even when the equilibrium is unique; and (c) similar results obtain for a model where individuals observe one another's actions, highlighting the importance of endogenous information more generally.

Economic models of Environment monitoring under imperfect information and high Costs

2014 ◽  
pp. 99-122
Author(s):  
M. Levin ◽  
K. Matrosova
Keyword(s):  
Environmental Monitoring ◽  
Environmental Regulation ◽  
Environmental Economics ◽  
Imperfect Information ◽  
Central Element ◽  
Economic Models ◽  
Environment Monitoring ◽  
Nature Protection ◽  
Protection Measures ◽  
Effective System

The paper considers monitoring of environmental change as the central element of environmental regulation. Monitoring, as each kind of principalagent relations, easily gives rise to corruptive behavior. In the paper we analyze economic models of environmental monitoring with high costs, incomplete information and corruption. These models should be the elements of environmental economics and are needed to create an effective system of nature protection measures.

Competition Policy under Economic Crisis

2009 ◽  
pp. 54-69 ◽  
Author(s):  
A. Shastitko ◽  
S. Avdasheva ◽  
S. Golovanova
Keyword(s):  
Division Of Labor ◽  
Economic Crisis ◽  
Industrial Policy ◽  
Competition Policy ◽  
Transition Economy ◽  
Economic Recession ◽  
Price Rigidity ◽  
Key Factor ◽  
Policy Measures ◽  
The Impact

The analysis of competition policy under economic crisis is motivated by the fact that competition is a key factor for the level of productivity. The latter, in its turn, influences the scope and length of economic recession. In many Russian markets buyers' gains decline because of the weakness of competition, since suppliers are reluctant to cut prices in spite of the decreasing demand. Data on prices in Russia and abroad in the second half of 2008 show asymmetric price rigidity. At least two questions are important under economic crisis: the 'division of labor' between pro-active and protective tools of competition policy and the impact of anti-crisis policy on competition. Protective competition policy is insufficient in transition economy, especially in the days of crisis it should be supplemented with the well-designed industrial policy measures which do not contradict the goals of competition. The preferable tools of anti-crisis policy are also those that do not restrain competition.

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