Rational Inattention, Multi-Product Firms and the Neutrality of Money

Ernesto Pasten

No 346, 2012 Meeting Papers from Society for Economic Dynamics

Abstract: I augment the rational inattention model of price-setting to allow for multi-product firms. Firms exploit economies of scale in the use of information by acquiring aggregate information: Aggregate information is useful for pricing all goods; idiosyncratic information is only useful for pricing the good it is concerned. As a result, the model still quantitatively predicts average price changes observed in the data and low costs for firms due to the friction. However, the model also predicts one fourth of money non-neutrality when firms produce two goods instead of one. Money becomes almost neutral when firms produce five goods or more.

Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://red-files-public.s3.amazonaws.com/meetpapers/2012/paper_346.pdf (application/pdf)

Related works:
Journal Article: Rational inattention, multi-product firms and the neutrality of money (2016)
Working Paper: Rational Inattention, Multi-Product Firms and the Neutrality of Money (2015)
Working Paper: Rational Inattention, Multi-Product Firms and the Neutrality of Money (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:red:sed012:346

Access Statistics for this paper

More papers in 2012 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().