We propose a price-setting model which helps reconcile microeconomic evidence of relatively frequent and large price changes with persistent real effects of monetary shocks. In our model, both price adjustments and the gathering of some types of information are costly, requiring the payment of a...

Standard theories of price adjustment are based on the problem of a single-product firm, and therefore they may not be well suited to analyze price dynamics in the economy with multiproduct firms. To guide new theory, we study a unique dataset with comprehensive coverage of daily prices in large...