The nature of price-setting decisions by firms has long played a pivotal role underlying controversies in macroeconomics. Whereas real business cycle (RBC) models assume that firms with full information are free to set prices optimally at all times, New Keynesian models are typically defined by departures from the assumption of flexible prices. Recent work has also emphasized the implications of deviating from the assumption of full-information in price setting. This paper is motivated by the idea that a single assumption about the price-setting decision process by firms may be insufficient to adequately capture macroeconomic dynamics by missing potentially important interactions among heterogeneous firms.
Indeed, firm-level evidence indicates striking heterogeneity in price setting as well as significant information costs. We develop and estimate a dynamic stochastic general equilibrium model that allows for four commonly assumed price-setting sectors to coexist and interact via their price-setting decisions. Our results indicate heterogeneity in price-setting behavior cannot be rejected. Importantly, strategic interaction across sectors changes the qualitative behavior of the inflation dynamics within each sector. Thus, the hybrid model behaves differently than the sum of its parts.
This paper develops and estimates a quantitative macroeconomic framework that incorporates labor market frictions. Our starting point is the now conventional monetary DSGE model developed by Christiano, Eichenbaum and Evans (CEE, 2005), Smets and Wouters (SW, 2007) and others. We introduce labor market frictions with a variant of the Mortensen and Pissarides search and matching framework. This variant allows for staggered Nash wage bargaining, as in Gertler and Trigari (GT, 2006).
The concept of familiarity and the use of different cues in social recognition by shoaling fish species have been well researched. Recently several studies have focused on determining whether more general habitat- and diet-based odour cues can be exploited by shoaling fish species to give association preferences, rather than more specific individual recognition. In this study the effect of diet-based cues on association preferences in the guppy (Poecilia reticulata) were investigated. Firstly, fish were divided equally between two treatment groups, each being subsequently subjected to a different two-week diet treatment (either bloodworm: BW or flake food: FF).Within each treatment group sub-groups of ten were created. Binary choice tests resulted in test fish showing significant association preferences for stimulus shoals composed of BW fish, regardless of the diet treatment they had been subjected to.
In familiarity tests, where both stimulus shoals were subjected to the same diet treatment but one was composed of familiars and the other of unfamiliars, BW fish showed no significant association preference for either shoal. FF fish however showed significant association preferences for unfamiliars, contradicting previously published data. Secondly fish were tested to investigate if diet-preferences exist and therefore affect association preferences. Pairs of fish, both from the same diet treatment were subjected to a binary choice test in which odour cues from both diets were added. BW fish showed a significant preference for the BW zone, whilst FF fish showed no significant preference for either diet. Results indicate that guppies can detect odour cues and to an extent use more general diet-based cues to form association preferences for those exploiting a similar diet to themselves. This however may be overridden by an existing preference for a specific diet.
