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Price Rigidity: A Survey of Evidence From Micro-Level Data

Author

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  • Craigwell, Roland
  • Moore, Winston
  • Morris, Diego
  • Worrell, DeLisle

Abstract

Over the last decade or more micro price studies have proliferated. In this paper a survey of this literature reveals alternative theoretical explanations of sticky prices: (a) sellers review and change prices only at predetermined intervals (except under extraordinary circumstances), so that any price reaction appears only when that time arrives (referred to as “time dependent pricing”); or (b) prices are always reviewed after a shock or policy move (“state dependent pricing”), but may be altered only if the difference between the actual and the new target price is sufficient to warrant an adjustment. The empirical evidence is that prices take longer to change in developed countries than in developing economies. In addition, the frequency of price movements differs widely across goods and the timing of price changes is not synchronized across sellers.

Suggested Citation

  • Craigwell, Roland & Moore, Winston & Morris, Diego & Worrell, DeLisle, 2011. "Price Rigidity: A Survey of Evidence From Micro-Level Data," MPRA Paper 40927, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:40927
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Price Rigidity; Consumer Prices; Inflation; Survey data;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics

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