This paper presents a theory of price stickiness in the United States, arguing that firms attribute a cost to price changes, leading to sticky prices. The model is based on rational expectations equilibrium and is estimated using postwar U.S. data. The results support the model, rejecting the hypothesis that prices are flexible. The paper shows that prices are sticky in the U.S., with firms adjusting prices slowly due to the costs of changing prices. The model is tested against alternative hypotheses, and the results are consistent with the model. The paper also discusses the implications of the model for the behavior of relative prices, aggregate output, and the price level. The model is estimated in two versions: one assuming all prices are set by price-setting firms, and another assuming only non-farm business sector firms have these characteristics. The estimates are consistent with the model, and the paper concludes that the data support the hypothesis that prices are relatively rigid. The paper also discusses the implications of the model for the behavior of relative prices and the price level, and the results are consistent with the model. The paper concludes that the data support the hypothesis that prices are relatively rigid.This paper presents a theory of price stickiness in the United States, arguing that firms attribute a cost to price changes, leading to sticky prices. The model is based on rational expectations equilibrium and is estimated using postwar U.S. data. The results support the model, rejecting the hypothesis that prices are flexible. The paper shows that prices are sticky in the U.S., with firms adjusting prices slowly due to the costs of changing prices. The model is tested against alternative hypotheses, and the results are consistent with the model. The paper also discusses the implications of the model for the behavior of relative prices, aggregate output, and the price level. The model is estimated in two versions: one assuming all prices are set by price-setting firms, and another assuming only non-farm business sector firms have these characteristics. The estimates are consistent with the model, and the paper concludes that the data support the hypothesis that prices are relatively rigid. The paper also discusses the implications of the model for the behavior of relative prices and the price level, and the results are consistent with the model. The paper concludes that the data support the hypothesis that prices are relatively rigid.