In the presence of menu costs can make prices sticky, and this stickiness can have a large cost to society. Suppose that a firm originally sets its price too high and later must decide shether to cut its price. The firm makes this decision by comparing the benefit of a price cut -- higher sales and profit -- to the cost of price adjustment. Yet because of the aggregate -- demand externality, the benefit to society of the price cut would exceed the benefit to the firm.
Thus recent work begins with the premise that it is in espensive to reduce nominal rigidiy and asks how substantial rigidity nonetheless arises. The central answer of the literature is presented by Mnkiw.