American Economic Journal: Macroeconomics
no. 2, April 2023
This paper studies price-setting decisions under rational inattention. Prices are set by tracking an unobserved target whose distribution is also unknown. Information acquisition is dynamic and fully flexible since, given information acquired previously, price setters choose the amount of information they collect as well as how they want to learn about both the outcome and its distribution. We show that by allowing for imperfect information to be the unique source of rigidity, the model can reconcile stylized facts in the microeconomic evidence on price setting while simultaneously being consistent with empirical results on state-dependent attention.
"State-Dependent Attention and Pricing Decisions."
American Economic Journal: Macroeconomics,
Firm Behavior: Theory
Asymmetric and Private Information; Mechanism Design
Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
Business Fluctuations; Cycles
Production, Pricing, and Market Structure; Size Distribution of Firms
Firm Performance: Size, Diversification, and Scope