Rigid Prices: Evidence from U.S. Scanner Data
45 Pages Posted: 26 Oct 2005 Last revised: 10 Aug 2010
Date Written: July 22, 2010
This paper uses over two years of weekly scanner data from two small US cities to characterize time and state dependence of grocers' pricing decisions. In these data, the probability of a nominal adjustment declines with the time since the last price change. This reflects differences over time in the flexibility of prices charged by a single store for a given good. We also detect state dependence: The probability of a nominal adjustment is highest when a store's price substantially differs from the average of other stores. However, extreme prices typically reflect the selling store's recent nominal adjustments rather than changes in other stores' prices.
Keywords: Nominal Price Adjustment, Scanner Data, Time Dependence, State Dependence
JEL Classification: E31, L16, L81
Suggested Citation: Suggested Citation