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

Author

Listed:
  • Daniel Levy

    (RCEA - Rimini Center for Economic Analysis, Emory University [Atlanta, GA], Bar-Ilan University [Israël])

  • Shantanu Dutta

    (FBE, Marshall School of Business - USC - University of Southern California)

  • Mark Bergen

    (Carlson School of Management - UMN - University of Minnesota [Twin Cities] - UMN - University of Minnesota System)

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

  • Daniel Levy & Shantanu Dutta & Mark Bergen, 2002. "Heterogeneity in Price Rigidity: Evidence from a Case Study Using Micro-Level Data," Post-Print hal-02386496, HAL.
    • Handle: RePEc:hal:journl:hal-02386496
    DOI: 10.1353/mcb.2002.0031
    Note: View the original document on HAL open archive server: https://hal.science/hal-02386496
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    Keywords

    Menu Cost; Cost of Price Adjustment; Price Rigidity; Sticky Prices; Rigid Prices; Price Flexibility; Variation in Price Rigidity; Price Stickiness; 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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