Working Paper
Bargaining, fairness, and price rigidity in a DSGE environment
Arseneau, David M.; Chugh, Sanjay K. (2007)
A growing body of evidence suggests that an important reason why firms do not change prices nearly as much as standard theory predicts is out of concern for disrupting ongoing customer relationships because price changes may be viewed as "unfair". Existing models that try to capture this concern regarding price-setting are all based on goods markets that are fundamentally Walrasian. In Walrasian goods markets, transactions are spot, making the idea of ongoing customer relationships somewhat difficult to understand. We develop a simple dynamic general equilibrium model of a search-based ...
International Finance Discussion Papers , Paper 900