Publication

This paper analyzes why decision-makers choose to act on a time-regular basis (e.g. adjust every six weeks) or on a state-regular basis (e.g. set prices ending in a 9). The paper attributes regular behavior to adjustment cost heterogeneity. The authors show that, given the cost heterogeneity, the likelihood of adopting regular policies depends on the shape of the benefit function: the flatter it is, the more likely, ceteris paribus, is regular adjustment. To test the model they apply it to optimal pricing policies.