The Relative Rigidity of Monopoly Pricing
NBER Working Paper No. 1943
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.
Published: American Economic Review, Vol. 77, No. 5, December 1987, pp. 917-926.