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Heterogeneity in Price Rigidity: Evidence from a Case Study Using Micro-Level Data

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Author Info
Daniel Levy (Bar-Ilan & Emory)
Shantanu Dutta (USC)
Mark Bergen (Minnesota)

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Abstract

We combine two data sets to study price rigidity. The first consists of weekly time series of retail, wholesale, and spot prices for twelve products. These time series contain two exogenous cost shocks. We find that prices exhibit more rigidity in response to the second shock than the first. The second data set consists of all publicly available information about the shocks. Content analysis of these information reveals that the first shock is larger and more persistent, and the market has more information on it than the second. We conclude, therefore, that prices are more flexible in response to cost shocks that are larger, that are more persistent, and on which market participants have more information.

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File URL: http://129.3.20.41/eps/mac/papers/0402/0402021.pdf
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Paper provided by EconWPA in its series Macroeconomics with number 0402021.

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Length: 38 pages
Date of creation: 07 Feb 2004
Date of revision:
Handle: RePEc:wpa:wuwpma:0402021

Note: Type of Document - pdf; prepared on Win 98; to print on Any printer; pages: 38 ; figures: Figures are included
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Web page: http://129.3.20.41

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Related research
Keywords: price rigidity; price flexibility; sticky prices; flexible prices; variation in price rigidity; variation in price flexibility; exogeneous shock; cost shock; shock persistence; size of shocks; market information; transaction price data; weekly scanner data; spot price; orange juice; frozen concentrate orange juice; futures price; retail price; wholesale price; publicly available information; market response to information; news; price response to exogenous cost shocks; New Keynesian macroeconomics;

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Find related papers by JEL classification:
D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco
L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
M21 - Business Administration and Business Economics; Marketing; Accounting - - Business Economics - - - Business Economics
M31 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising - - - Marketing
Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness

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