Nakamura, Emi; Steinsson, Jón - In: Journal of Monetary Economics 58 (2011) 3, pp. 220-233
If consumers form habits in individual goods, firms face a time-inconsistency problem. Low prices in the future help attract customers in the present. Firms, therefore, have an incentive to promise low prices in the future, but price gouge when the future arrives. In this setting, firms benefit...