Seminar Behavioral Sticky Prices Macroeconomics seminar Add to calendar 2024-10-04 15:00 2024-10-04 16:15 Europe/Rome Behavioral Sticky Prices Seminar Room 3rd Floor Villa La Fonte YYYY-MM-DD Print Share on Facebook Share on X Share on LinkedIn Send by email When 04 October 2024 15:00 - 16:15 CEST Where Seminar Room 3rd Floor Villa La Fonte Organised by Department of Economics In this seminar, Pedro Teles (Catolica-Lisbon School of Business & Economics), will present the paper 'Behavioral Sticky Prices'. We study a model where households make decisions according to a dual- process framework widely used in cognitive psychology. System 1 uses effortless heuristics but is susceptible to biases and errors. System 2 uses mental effort to make more accurate decisions. Through their pricing behaviour, monopolistic producers can influence whether households deploy Systems 1 or 2. The strategic use of this influence creates a new source of price inertia and provides a natural explanation for the "rockets and feathers" phenomenon: prices rise quickly when costs increase but fall slowly when costs fall. Our model implies that price stability is not optimal.Co-authors: Sergio Rebelo (Northwestern University) and Miguel Santana (Northwestern University) Contact(s): Cecile Marie Brière (EUI - Department of Economics) Scientific Organiser(s): Prof. Jesus Bueren (EUI - Department of Economics) Speaker(s): Prof. Pedro Teles (Universidade Católica Portuguesa and Bank of Portugal)