Merkl, Christian (contributor); … - 2007
, Woodford, 2005).10
Prices are set �exibly as a mark-up over the nominal marginal costs:
Pt (i) = pMCnt (i), (2)
where Pt is … the price11, MCnt are the nominal marginal costs, p = ("p=("p 1))
is the steady-state mark-up in the product market, and … "p is the elasticity of
substitution between di�erent product types. The �rm speci�c marginal costs are
equal to the wage …