TY  - JOUR
AU  - Carlton,Dennis W.
TI  - Modeling Price Rigidity or Predicting the Quality of the Good that Clears the Market
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 503
PY  - 1980
Y2  - July 1980
UR  - http://www.nber.org/papers/w0503
L1  - http://www.nber.org/papers/w0503.pdf
N1  - Author contact info:
Dennis W. Carlton
Booth School of Business
University of Chicago
5807 S. Woodlawn Ave.
Chicago, IL 60637
Tel: 847/217-6000
Fax: 312/322-0262
E-Mail: dennis.carlton@chicagobooth.edu
AB  - To say that the price of some good is inflexible over time has little meaning if the "good" is changing over time. In this paper we concentrate on delivery lags as being the only dimension other than price that varies. We show how one can predict the relative importance of price and delivery lag fluctuations as equilibrating mechanisms. The complications of the theory as well as the surprising results underscore the complexity of predicting price behavior when the characteristics of the good are endogenous. The empirical results provide strong support for the theory that delivery lags are an important influence on market behavior and therefore that an understanding of their influence is crucial in predicting how markets will respond to supply and demand shocks.
ER  -