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Heterogeneity in Price Rigidity: Evidence from a Case Study Using Microlevel Data

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  • Levy, Daniel
  • Dutta, Shantanu
  • Bergen, Mark

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.

Suggested Citation

  • Levy, Daniel & Dutta, Shantanu & Bergen, Mark, 2002. "Heterogeneity in Price Rigidity: Evidence from a Case Study Using Microlevel Data," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 34(1), pages 197-220.
    • Handle: RePEc:zbw:espost:206823
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    Keywords

    Menu Cost; Cost of Price Adjustment; Price Rigidity; Variation in Price Rigidity; Rigid Prices; Sticky Prices; Exogenous Shocks; Temporary Shocks; Permanent Shocks; Weather Shocks; News; Information Shocks; Content Analysis; Shock Persistence;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure

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