Price adjustment and market structure

Research output: Contribution to journalArticle

Abstract

This paper shows how the extent of price inertia depends on the form of market competition. We first establish that the speed of price adjustment depends on the curvature of the profit function in the region around the optimum price. We then show how this depends on market structure. We prove the following results: 1. (1) the speed of price adjustment depends positively on the price elasticity of demand; 2. (2) the speed of price adjustment depends positively on the number of firms in a market; and 3. (3) the speed of price adjustment depends negatively on the degree of collusion between firms.

Original languageEnglish
Pages (from-to)139-143
Number of pages5
JournalEconomics Letters
Volume41
Issue number2
DOIs
Publication statusPublished - 1993

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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