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Sticky Information and Price Controls: Evidence from a Natural Experiment

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  • Sayag, Doron
  • Snir, Avichai
  • Levy, Daniel

Abstract

We test the predictions of the sticky information model using a survey dataset by comparing the shoppers’ accuracy in recalling the prices of regulated and comparable unregulated products. Regulated product prices change less frequently, vary less across stores and between brands, and are sold more than comparable but unregulated product prices. Therefore, shoppers would be expected to recall the regulated product prices more accurately. However, we find that shoppers are better at recalling the prices of unregulated products, in line with the sticky information model which predicts that shoppers will be more attentive to prices that change more frequently.

Suggested Citation

  • Sayag, Doron & Snir, Avichai & Levy, Daniel, 2025. "Sticky Information and Price Controls: Evidence from a Natural Experiment," EconStor Preprints 308108, ZBW - Leibniz Information Centre for Economics.
    • Handle: RePEc:zbw:esprep:308108
    DOI: 10.2139/ssrn.5082444
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    Keywords

    Sticky Information; Cost and Benefit of Information; Information Gathering; Information Processing; Price Cap; Price Regulation; Price Controls; Price Adjustment; Sticky Prices; Rigid Prices; Price Stickiness; Price Rigidity;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • K20 - Law and Economics - - Regulation and Business Law - - - General
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General

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