The probability that a given price will change increases, to a certain extent, when that price is further from the optimum. However, the probability of price adjustment conditional on an aggregate shock does not seem to depend on the distance from the optimum. [6] The authors also discuss which models can match such price-setting behaviour.
The promising candidates are state-dependent models with random menu costs and models of informationconstrained price-setting. [7] In both classes of models, the selection effect can be weak: some prices fail to adjust even though the distance from the optimum may be large, while other prices change despite that distance being small.