A Permanent Demand Theory of Pricing
1986 (English)Report (Other academic)
Based on standard statis models of firm behavior one would expect the price of goods to increase with demand for a given level of costs. In empirical studies prices have generally been found to be unaffected by short run variations in demand, however. The model in this paper is consistent with this stylised fact. In the model, a demand shock that is perceived as temporary may lead to unchanged or even lower prices, while a permanent demand shock leads to higher prices.
Place, publisher, year, edition, pages
Stockholm: IIES , 1986. , 24 p.
Seminar Paper / Institute for International Economic Studies, Stockholm University, ISSN 0347-8769 ; 345
IdentifiersURN: urn:nbn:se:su:diva-41524OAI: oai:DiVA.org:su-41524DiVA: diva2:331065