Sticky prices and wages are often cited as an example of market inefficiency. For example, many firms, during recessions, lay off workers. Yet many of these same firms are reluctant to begin hiring, even as the economic situation improves. Can you provide an explanation for this behavior that might demonstrate that it is rational?

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The Answer of Sticky prices and wages are often cited as an example of market inefficiency. For example, many firms, during recessions, lay off workers. Yet many of these same firms are reluctant to begin hiring, even as the economic situation improves. Can you provide an explanation for this behavior that might demonstrate that it is rational?

Sticky Prices and Wages Are Often Cited as an Example