Advanced Search
MyIDEAS: Login to save this article or follow this journal

Altruistic Dynamic Pricing with Customer Regret

Contents:

Author Info

  • Julio J. Rotemberg

Abstract

A model is considered in which firms internalize the costly regret that consumers experience when prices change unexpectedly. This regret is greater when prices change by more, and this can explain why the actual size of price increases for firms with rigid prices is less sensitive to inflation than in models with fixed costs of changing prices. Regret costs of this form also lead to more variable price changes than fixed costs do. Last, the practice of announcing price increases in advance is easier to rationalize with regret concerns by consumers than with more standard approaches to price rigidity. Copyright © The editors of the "Scandinavian Journal of Economics" 2010 .

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-9442.2010.01620.x
File Function: link to full text
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Wiley Blackwell in its journal Scandinavian Journal of Economics.

Volume (Year): 112 (2010)
Issue (Month): 4 (December)
Pages: 646-672

as in new window
Handle: RePEc:bla:scandj:v:112:y:2010:i:4:p:646-672

Contact details of provider:
Web page: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1467-9442

Order Information:
Web: http://www.blackwellpublishing.com/subs.asp?ref=0347-0520

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
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.:
as in new window
  1. Mikhail Golosov & Robert E. Lucas, 2003. "Menu Costs and Phillips Curves," NBER Working Papers 10187, National Bureau of Economic Research, Inc.
  2. Etienne Gagnon, 2007. "Price setting during low and high inflation: evidence from Mexico," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 896, Board of Governors of the Federal Reserve System (U.S.).
  3. Dennis W. Carlton, 1986. "The Rigidity of Prices," NBER Working Papers 1813, National Bureau of Economic Research, Inc.
  4. Emmanuel Dhyne & Luis J. Alvarez & Herve Le Bihan & Giovanni Veronese & Daniel Dias & Johannes Hoffmann & Nicole Jonker & Patrick Lunnemann & Fabio Rumler & Jouko Vilmunen, 2006. "Price Changes in the Euro Area and the United States: Some Facts from Individual Consumer Price Data," Journal of Economic Perspectives, American Economic Association, vol. 20(2), pages 171-192, Spring.
  5. Mark Gertler & John Leahy, 2008. "A Phillips Curve with an Ss Foundation," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 116(3), pages 533-572, 06.
  6. Michael Woodford, 2008. "Information-Constrained State-Dependent Pricing," Discussion Papers, Columbia University, Department of Economics 0809-12, Columbia University, Department of Economics.
  7. Botond Kőszegi & Paul Heidhues, 2008. "Competition and Price Variation When Consumers Are Loss Averse," American Economic Review, American Economic Association, vol. 98(4), pages 1245-68, September.
  8. Julio J. Rotemberg, 2008. "Behavioral Aspects of Price Setting, and Their Policy Implications," NBER Working Papers 13754, National Bureau of Economic Research, Inc.
  9. Emi Nakamura & Jón Steinsson, 2008. "Five Facts about Prices: A Reevaluation of Menu Cost Models," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 123(4), pages 1415-1464, November.
  10. Gita Gopinath & Roberto Rigobon, 2008. "Sticky Borders," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 123(2), pages 531-575, 05.
  11. N. Gregory Mankiw & Ricardo Reis, 2001. "Sticky Information Versus Sticky Prices: A Proposal to Replace the New Keynesian Phillips Curve," Harvard Institute of Economic Research Working Papers 1922, Harvard - Institute of Economic Research.
  12. Fabiani, Silvia & Druant, Martine & Hernando, Ignacio & Kwapil, Claudia & Landau, Bettina & Loupias, Claire & Martins, Fernando & Mathä, Thomas Y. & Sabbatini, Roberto & Stahl, Harald & Stokman, Ad C, 2005. "The pricing behaviour of firms in the euro area: new survey evidence," Working Paper Series, European Central Bank 0535, European Central Bank.
  13. Cecchetti, Stephen G., 1986. "The frequency of price adjustment : A study of the newsstand prices of magazines," Journal of Econometrics, Elsevier, Elsevier, vol. 31(3), pages 255-274, April.
  14. Lach, Saul & Tsiddon, Daniel, 1992. "The Behavior of Prices and Inflation: An Empirical Analysis of Disaggregated Price Data," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 100(2), pages 349-89, April.
  15. Anil K Kashyap, 1994. "Sticky Prices: New Evidence from Retail Catalogs," NBER Working Papers 4855, National Bureau of Economic Research, Inc.
  16. Benabou, Roland, 1987. "Optimal price dynamics and speculation with a storable good," CEPREMAP Working Papers (Couverture Orange) 8708, CEPREMAP.
  17. Götte, Lorenz & Minsch, Rudolf & Tyran, Jean-Robert, 2005. "Micro Evidence on the Adjustment of Sticky-Price Goods: It's How Often, Not How Much," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5364, C.E.P.R. Discussion Papers.
  18. Michael Dotsey & Robert G. King & Alexander L. Wolman, 1999. "State-Dependent Pricing And The General Equilibrium Dynamics Of Money And Output," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 114(2), pages 655-690, May.
  19. Virgiliu Midrigan, 2005. "Menu Costs, Multi-Product Firms and Aggregate Fluctuations," Macroeconomics, EconWPA 0511004, EconWPA.
  20. Sheshinski, Eytan & Weiss, Yoram, 1977. "Inflation and Costs of Price Adjustment," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 44(2), pages 287-303, June.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Daniel Levy & Dongwon Lee & Haipeng (Allan) Chen & Robert J. Kauffman & Mark Bergen, 2011. "Price Points and Price Rigidity," The Review of Economics and Statistics, MIT Press, vol. 93(4), pages 1417-1431, November.
  2. Avichai Snir & Daniel Levy & Alex Gotler & Haipeng (Allen) Chen, 2012. "Not All Price Endings are Created Equal: Price Points and Asymmetric Price Rigidity," Emory Economics, Department of Economics, Emory University (Atlanta) 1206, Department of Economics, Emory University (Atlanta).
  3. Emmanuel Saez & Pascal Michaillat, 2013. "A Theory of Aggregate Supply and Aggregate Demand as Functions of Market Tightness with Prices as Parameters," 2013 Meeting Papers, Society for Economic Dynamics 1216, Society for Economic Dynamics.
  4. Ahrens, Steffen & Pirschel, Inske & Snower, Dennis J., 2014. "A Theory of Price Adjustment under Loss Aversion," IZA Discussion Papers 8138, Institute for the Study of Labor (IZA).
  5. Lindsey, Robin, 2011. "State-dependent congestion pricing with reference-dependent preferences," Transportation Research Part B: Methodological, Elsevier, vol. 45(10), pages 1501-1526.
  6. Francesco Passarelli & Guido Tabellini, 2013. "Emotions and Political Unrest," Working Papers 474, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  7. Steffen Ahrens & Matthias Hartmann, 2014. "State-dependence vs. Time-dependence: An Empirical Multi-Country Investigation of Price Sluggishness," Kiel Working Papers 1907, Kiel Institute for the World Economy.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:bla:scandj:v:112:y:2010:i:4:p:646-672. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.