Comparative Statics with Adjustment Costs and the Le Chatelier Principle
We develop a theory of monotone comparative statics in the presence of adjustment costs. We show that comparative-statics conclusions may be drawn under the usual ordinal complementarity assumptions on the objective function, assuming almost nothing about costs: the only requirement is that non-adjustment be costless. We use this insight to provide a general treatment of the le Chatelier principle based on adjustment costs. We extend these results to a fully dynamic, forward-looking model of adjustment over time: given only minimal structure on costs, optimal adjustment follows a monotone path. We apply our results to models of investment and of sticky prices.
Date:
21 February 2023, 12:45 (Tuesday, 6th week, Hilary 2023)
Venue:
Nuffield College, New Road OX1 1NF
Venue Details:
Butler Room, D Staircase or https://zoom.us/j/92241183272?pwd=ZXliWGhFL3VDdm5rSXdSbTRXN0VyQT09
Speaker:
Ludvig Sinander (University of Oxford)
Organising department:
Department of Economics
Part of:
Economic Theory Workshop
Booking required?:
Not required
Audience:
Members of the University only
Editor:
Emma Heritage
