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Sticky prices: why firms hesitate to adjust the price of their goods

Author

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  • Pinelopi K. Goldberg
  • Rebecca Hellerstein

Abstract

Price stickiness?the tendency of prices to remain constant despite changes in supply and demand?has been linked to firms? unwillingness to pay the costs entailed in setting, implementing, and advertising new prices. However, there is little consensus on the size and importance of these ?repricing costs.? Taking the imported beer market as their subject, the authors of this study find repricing costs to be markedly higher for manufacturers than for retailers and conclude that, at the wholesale level, these costs are a significant deterrent to price adjustment.

Suggested Citation

  • Pinelopi K. Goldberg & Rebecca Hellerstein, 2007. "Sticky prices: why firms hesitate to adjust the price of their goods," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 13(Nov).
    • Handle: RePEc:fip:fednci:y:2007:i:nov:n:v.13no.10
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    Citations

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    Cited by:

    1. Levy, Daniel & Snir, Avichai & Gotler, Alex & Chen, Haipeng (Allan), 2020. "Not all price endings are created equal: Price points and asymmetric price rigidity," Journal of Monetary Economics, Elsevier, vol. 110(C), pages 33-49.
    2. Hellerstein, Rebecca, 2008. "Who bears the cost of a change in the exchange rate? Pass-through accounting for the case of beer," Journal of International Economics, Elsevier, vol. 76(1), pages 14-32, September.
    3. Young, Andrew T. & Levy, Daniel, 2014. "Explicit Evidence of an Implicit Contract," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 30(4), pages 804-832.
    4. Pinelopi Koujianou Goldberg & Rebecca Hellerstein, 2013. "A Structural Approach to Identifying the Sources of Local Currency Price Stability," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 80(1), pages 175-210.
    5. Pierre Bernhard & Marc Deschamps, 2016. "Dynamic equilibrium in games with randomly arriving players," Working Papers 2016-10, CRESE.
    6. Paulie, Charlotte, 2019. "Does Inflation Targeting Reduce the Dispersion of Price Setters’ Inflation Expectations?," Working Paper Series 370, Sveriges Riksbank (Central Bank of Sweden).
    7. Paulie, Charlotte, 2019. "Does Inflation Targeting Reduce the Dispersion of Price Setters’ Inflation Expectations?," Working Paper Series 2018:16, Uppsala University, Department of Economics.

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