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s-S Models

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The New Palgrave Dictionary of Economics

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Abstract

The s-S model is the canonical model of infrequent and discrete action. It has been used to explain inertia in durable goods, investment, money demand, and cash management, and to provide microfoundations for price stickiness and the real effects of money. In the model, fixed costs make small adjustment impractical. Agents allow their state to drift in response to shocks until it reaches an adjustment trigger before setting it to a target value. This article reviews the microeconomic comparative statics of the optimal s-S policy, as well as the implications of discrete individual adjustment aggregate dynamics.

This chapter was originally published in The New Palgrave Dictionary of Economics, 2nd edition, 2008. Edited by Steven N. Durlauf and Lawrence E. Blume.

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  1. http://link.springer.com/referencework/10.1057/978-1-349-95121-5

    John Leahy

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  1. John Leahy
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    Leahy, J. (2008). s-S Models. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95121-5_2281-1

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    • DOI: https://doi.org/10.1057/978-1-349-95121-5_2281-1

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    • Publisher Name: Palgrave Macmillan, London

    • Online ISBN: 978-1-349-95121-5

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