Alvarez, Fernando; Lippi, Francesco; Paciello, Luigi - C.E.P.R. Discussion Papers - 2012
We study a model in which prices respond slowly to shocks because firms must pay a fixed cost to observe the determinants of the profit maximizing price, as pioneered by Caballero (1989) and Reis (2006). We extend their analysis to the case of random tran- sitory variation in the firm’s...