NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Relative Rigidity of Monopoly Pricing

Julio J. Rotemberg, Garth Saloner

NBER Working Paper No. 1943
Issued in May 1986
NBER Program(s):   EFG

This paper seeks to explain why monopolies keep their nominal prices

constant for longer periods than do tight oligopolies. We provide two

possible explanations. The first is based on the presence of a small fixed

cost of changing prices. The second, on small costs of discovering the

optimal price. The incentive to change price for duopolists producing

differentiated products exceeds that of a single monopolistic firm which

produced the same tange of products as the duopoly.

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Document Object Identifier (DOI): 10.3386/w1943

Published: American Economic Review, Vol. 77, No. 5, December 1987, pp. 917-926. citation courtesy of

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