This paper shows that price rigidity evolves in an economy populated by imperfectly rational agents who experiment with alternative rules of thumb. In the model, firms must set their prices in face of aggregate demand shocks. Their payoff depends on the level of aggregate demand, as well as on...

This paper derives a New Keynesian dynamic general equilibrium model with liquidity- constrained consumers and sticky prices. The model allows a role for both government spending and taxation in the DGE model. The model is then estimated using US data. We demonstrate that there seems to be a...

We document a novel role of heterogeneity in price rigidity: It strongly amplifies the capacity of idiosyncratic shocks to drive aggregate fluctuations. Heterogeneity in price rigidity also completely changes the identity of sectors from which fluctuations originate. We show these results both...

This paper estimates a New Keynesian model with new and old behavioral elements. Agents in the model exhibit cognitive discounting, or myopia: they discount variables far into the future at higher rates than typically implied in the benchmark model. We investigate the model under different...

This paper aims to explore the impact of rising uncertainty on prices using micro-data on prices and multi-sector new Keynesian models. We identify diverse price responses to increasing macroeconomic uncertainty: goods with relatively flexible prices experience a decline due to lower demand...

This paper analyzes the inequalities and convergence across countries using data on the top 100 players in chess and tennis. We explore the impact of time trends and exogenous global shocks on countries' representation in the top 100 players' lists in a manner akin to a natural experiment,...

In this paper we develop a multi-sector model of firms pricing behaviour under imperfect competition. We allow for the fact that some goods sold will be for final consumption, while others will be used as intermediate goods in further production. We assume that price setters are constrained by...