Price Setting

“Truman Bewley has a unique interview skill in drawing out the thought process that important, if unsung, economic decision makers go through on a regular basis. His results ought to change our thinking about central economic policy issues, notably about the management of inflation and recessions.” Robert J. Shiller, Sterling Professor Emeritus of Economics at Yale University, and author of Irrational Exuberance “How prices respond to the business cycle – and why they often don’t –  is one of the enduring mysteries of economics. In Price Setting, the eminent scholar Truman Bewley tackles the question with the simple but powerful method of asking businesspeople why they do what they do. The result is a must-read for anyone who wants to understand the economy.” N. Gregory Mankiw, Harvard University, and author of Macroeconomics and Principles of Economics “Bewley has patiently asked hundreds of company managers how they operate when setting prices, and has skillfully summarized their responses in terms that make sense to an economist. The result is a set of new and important insights into how a modern economy actually works.” Peter Howitt, Brown University “Truman Bewley has made foundational contributions to decision theory under uncertainty, the general equilibrium model with incomplete markets, and pure monetary theory. This remarkable new book shows Bewley’s versatility and openness to new methods. Based on painstaking interviews with executives, the book is full of new evidence, findings, and ideas about determinants of time series properties of nominal prices for various types of commodities. Bewley’s approach deserves to be applied to the study price setting during other episodes, and in other countries experiencing diverse rates of price level inflations.” Thomas Sargent, New York University