| Abstract: | This article studies intertemporal monopolistic pricing strategies when demand is dynamic and when price volatility may harm other producer objectives, e.g. the political good will for an international cartel. The major implications from this framework are that the introduction of a penalty for price changes may actually change an otherwise (at least locally) monotonic policy into a (transiently) oscillatory strategy; on the other hand, penalizing price changes smooths the price policy when demand is convex and the optimal strategy would otherwise be extremely volatile. But, then, all various types of solutions—cyclical and even unstable solutions—may occur. |
