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This paper develops a dynamic model to analyze the e¤ ects of di¤ erent levels of price ‡uctuations on resource allocation e¢ ciency. The model shows two di¤ erent strategies that enterprises adopt when they confront di¤ erent levels of price ‡uctuations. In respond to small ‡uctuations, enterprises might adopt a conservative strategy of maintaining the ratio of factor inputs and leaving production plans unchanged of the adjustment cost. As a result, allocation ine¢ ciency is unavoidable.doi:10.1080/1331677x.2012.11517525 fatcat:viwuuk5ubzbpnezj2dylwhg5ce