Abstract
This paper examines the frequency of price adjustments with imperfect seller credibility in a static setting. Firms must commit to prices as a way to circumvent the potential hold up of consumers who face search costs. Infrequent price adjustments is a commitment mechanism against the potential hold-up problem. Conditions under which commitment to a single price is optimal are given. Firms adjust prices according to its cost when the potential cost is high, or when the search cost is small, or if the distribution of consumer reservation prices has a high hazard rate. The effects of product market competition are also analyzed. This paper provides a new source for the cost of adjusting prices.