TY  - JOUR
A1  - Orland, Andreas
A1  - Roos, Michael W. M.
T1  - Price-setting with quadratic adjustment costs
T2  - Journal of economic behavior & organization
N2  - We test the price-setting behavior of firms using the Rotemberg (1982) model in order to explain puzzles in the New Keynesian Phillips curve (NKPC). For our tests, we conducted experiments that adapt the model into an individual decision-making problem. We find systematic deviations in price-setting according to the subjects’ degree of information acquisition. Subjects rarely make use of past information. On the other hand, subjects that decide to acquire relatively little information about future desired prices tend to overweight their own past set price when they set prices. We study the impact of this heterogeneous price-setting behavior for theoretically derived forward-looking Phillips curves. Our estimated NKPCs are in line with the empirical literature. The deviations from theoretical predictions in our NKPCs are driven by the less-informed subjects.
KW  - Experimental macroeconomics
KW  - Intertemporal optimization
KW  - Nominal frictions
KW  - Phillips curve
Y1  - 2019
UR  - https://publishup.uni-potsdam.de/frontdoor/index/index/docId/48933
SN  - 0167-2681
SN  - 1879-1751
VL  - 163
SP  - 88
EP  - 116
PB  - Elsevier
CY  - Amsterdam
ER  -