Research Discussion Paper – RDP 2007-12 Dynamic Pricing and Imperfect Common Knowledge

Contents

• Introduction
• Idiosyncratic Marginal Costs
• A Simple General Equilibrium Model
• Price Dynamics
• Conclusions
• Appendix A: The Phillips Curve with Imperfect Common Knowledge
• Appendix B: The Law of Motion of the Expectations Hierarchy
• References

The author thanks Klaus Adam, Leon Berkelmans, Giuseppe Bertola, Giancarlo Corsetti, Fabio Ghironi, James Hansen, Jarkko Jääskelä, Mariano Kulish, Tim Robinson, Thomas Sargent, Michael Woodford, Stephen Wright and seminar participants at the ECB, the European University Institute, Birkbeck College, University of Cambridge, and Nuffield College for valuable comments on earlier drafts. The views expressed in this paper are those of the author and not necessarily those of the Reserve Bank of Australia.