Skip to main content

STICERD Economic Theory Seminars

Comparative statics with adjustment costs and the le Chatelier principle

Ludvig Sinander (University of Oxford), joint with Eddie Dekel and John K.-H. Quah

Thursday 26 October 2023 15:30 - 17:00

Many of our seminars and public events this year will continue as in person or as hybrid (online and in person) events. Please check our website listings and Twitter feed @STICERD_LSE for updates.

Unless otherwise specified, in-person seminars are open to the public.

Those unable to join the seminars in-person are welcome to participate via zoom if the event is hybrid.

About this event

We develop a theory of monotone comparative statics for models with adjustment costs. We show that comparative-statics conclusions may be drawn under the usual ordinal complementarity assumptions on the objective function, assuming very little about costs: only a mild monotonicity condition is required. We use this insight to prove a general le Chatelier principle: under the ordinal complementarity assumptions, if short-run adjustment is subject to a monotone cost, then the long-run response to a shock is greater than the short-run response. We extend these results to a fully dynamic model of adjustment over time: the le Chatelier principle remains valid, and under slightly stronger assumptions, optimal adjustment follows a monotone path. We apply our results to models of capital investment and of sticky prices.

Economic Theory Seminars are held on Thursdays in term time at 15:30-17:00, both ONLINE and IN PERSON in SAL 3.05.

Seminar organisers: Dr Andrew Ellis and Dr Christopher Sandmann.

For further information please contact Sadia Ali:

Please use this link to subscribe or unsubscribe to the Economic Theory seminars mailing list (etheory).