with pricing moments. We develop a simple menu-cost model with strategic complementarities along with idiosyncratic … productivity and demand shocks that are disciplined by the data. This approach allows us to overcome previous criticism from …-through documented in previous studies, while also remaining consistent with micro pricing and markup evidence. …

alternative rules of thumb. In the model, firms must set their prices in face of aggregate demand shocks. Their payoff depends on … the level of aggregate demand, as well as on their own price and their neighbor s price. The latter assumption captures … local interactions. Despite the fact that the rational expectations equilibrium (REE) is characterized by a simple pricing …

is too high because firms ignore an aggregate demand externality, and when there are costs of changing prices, price …

is too high because firms ignore an aggregate demand externality, and when there are costs of changing prices, price …