Inattentive producers:

"I present and solve the problem of a producer who faces costs of acquiring, absorbing, and processing information. I establish a series of theoretical results describing the producer's behavior. First, I find the conditions under which she prefers to set a plan for the price she charges,...

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Bibliographic Details
Main Author: Reis, Ricardo 1978- (Author)
Format: Book
Language:English
Published: Cambridge, Mass. National Bureau of Economic Research 2005
Series:National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series 11820
Subjects:
Online Access:Volltext
Summary:"I present and solve the problem of a producer who faces costs of acquiring, absorbing, and processing information. I establish a series of theoretical results describing the producer's behavior. First, I find the conditions under which she prefers to set a plan for the price she charges, or instead prefers to set a plan for the quantity she sells. Second, I show that the agent rationally chooses to be inattentive to news, only sporadically updating her information. I solve for the optimal length of inattentiveness and characterize its determinants. Third, I explicitly aggregate the behavior of many such producers. I apply these results to a model of inflation. I find that the model can fit the quantitative facts on post-war inflation remarkably well, that it is a good forecaster of future inflation, and that it survives the Lucas critique by fitting also the pre-war facts on inflation moderately well"--National Bureau of Economic Research web site.
Physical Description:35 S. graph. Darst.

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