Consumption Inertia and Asymmetric Price Transmission
AbstractWe propose consumption inertia as a new explanation for asymmetric price transmission. Inertia in consumer demand enlarges retailersâ€™ gains in gross profits from raising prices in response to higher wholesale prices and reduces gains from decreasing prices in response to lower wholesale prices. Thus, consumption inertia can cause asymmetries in price transmission whereby retailers are more willing to change their prices, and change them more quickly, in response to wholesale price increases as opposed to wholesale price decreases.
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Bibliographic InfoArticle provided by Western Agricultural Economics Association in its journal Journal of Agricultural and Resource Economics.
Volume (Year): 35 (2010)
Issue (Month): 2 (August)
asymmetric price transmission; consumption inertia; market power; retail pricing; Demand and Price Analysis;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Sofia Berto Villas-Boas, 2007.
"Vertical Relationships between Manufacturers and Retailers: Inference with Limited Data,"
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- Villas-Boas, Sofia B., 2006. "Vertical relationships between manufacturers and retailers: inference with limited data," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt0z26d2v9, Department of Agricultural & Resource Economics, UC Berkeley.
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- Giliola Frey & Matteo Manera, 2007. "Econometric Models Of Asymmetric Price Transmission," Journal of Economic Surveys, Wiley Blackwell, vol. 21(2), pages 349-415, 04.
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