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In economics, the menu cost is a cost that a firm incurs due to changing its prices. It is one microeconomic explanation of the price-stickiness of the macroeconomy put by New Keynesian economists. [1] The term originated from the cost when restaurants print new menus to change the prices of items.
In the 1980s the key concept of using menu costs in a framework of imperfect competition to explain price stickiness was developed. [10] The concept of a lump-sum cost (menu cost) to changing the price was originally introduced by Sheshinski and Weiss (1977) in their paper looking at the effect of inflation on the frequency of price-changes. [11]
Most models relate the decision to change prices to menu costs. Firms change prices when the benefit of changing a price becomes larger than the menu cost of changing a price. Price changes may be bunched or staggered over time. Prices change faster and monetary shocks are over faster under state dependent than time. [1]
Customers have sought relief on chain apps from rising fast food menu costs, but the deals decrease over time, social media users report. Above, a McDonald's sign in Illinois in 2020.
His paper "Small Menu Costs and Large Business Cycles: A Macroeconomic Model of Monopoly", which was published in the Quarterly Journal of Economics in 1985, compared a firm's private incentive to adjust prices after a shock to nominal aggregate demand with that decision's social welfare implications. The paper concluded that expansion in ...
Pages in category "New Keynesian economics" The following 16 pages are in this category, out of 16 total. ... Menu cost; N. New neoclassical synthesis; Nominal ...
Jón Steinsson (born 1976) is an Icelandic-American economist who is the Chancellor's Professor of Economics at University of California, Berkeley, a research associate and co-director of the Monetary Economics program of the National Bureau of Economic Research, and associate editor of both American Economic Review: Insights, and the Quarterly Journal of Economics.
Sale prices for offices, meanwhile, fell again. Office properties sold at an average of $179 per square foot, down 9% from the average sale price last year, though that marks a slowdown from the ...