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

Non-price rigidity and cost of adjustment

Contents:

Author Info

  • Georg Müller

    (Monitor Group, Chicago, IL, USA)

  • Mark Bergen

    (University of Minnesota, Minneapolis, MN, USA)

  • Shantanu Dutta

    (University of Southern California, Los Angeles, CA, USA)

  • Daniel Levy

    (Bar-Ilan University, Ramat-Gan, Israel)

Abstract

There has been increasing interest in understanding how firms undertake non-price adjustment activities, especially in situations where prices may be rigid despite changes in market conditions. Using scanner price data for over 4500 different food products from a large US supermarket chain, we document periods of rigidity in product additions and deletions: new products are less likely to be introduced, and existing products are less likely to be discontinued during holiday periods than throughout the rest of the year. We argue that this is due to higher costs of undertaking these kinds of product assortment activities during holiday periods. We discuss how this relates to the exiting literature on non-price adjustment and price rigidity. Copyright © 2007 John Wiley & Sons, Ltd.

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://hdl.handle.net/10.1002/mde.1379
File Function: Link to full text; subscription required
Download Restriction: no

Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Managerial and Decision Economics.

Volume (Year): 28 (2007)
Issue (Month): 7 ()
Pages: 817-832

as in new window
Handle: RePEc:wly:mgtdec:v:28:y:2007:i:7:p:817-832

Contact details of provider:
Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976

Related research

Keywords:

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. Levy, Daniel & Müller, Georg & Chen, Haipeng (Allan) & Bergen, Mark & Dutta, Shantanu, 2008. "Holiday Price Rigidity and Cost of Price Adjustment," MPRA Paper 13095, University Library of Munich, Germany.
  2. Rotemberg, Julio J, 1982. "Sticky Prices in the United States," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 90(6), pages 1187-1211, December.
  3. Robert Barsky & Mark Bergen & Shantanu Dutta & Daniel Levy, 2001. "What Can the Price Gap between Branded and Private Label Products Tell Us about Markups?," NBER Working Papers 8426, National Bureau of Economic Research, Inc.
  4. Mankiw, N Gregory, 1985. "Small Menu Costs and Large Business Cycles: A Macroeconomic Model," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 100(2), pages 529-38, May.
  5. Dutta, Shantanu, et al, 1999. "Menu Costs, Posted Prices, and Multiproduct Retailers," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 31(4), pages 683-703, November.
  6. Mark Zbaracki & Mark Ritson & Daniel Levy & Shantanu Dutta & Mark Bergen, 2003. "Managerial and Customer Costs of Price Adjustment: Direct Evidence from Industrial Markets," Working Papers, Bar-Ilan University, Department of Economics 2003-07, Bar-Ilan University, Department of Economics.
  7. Domberger, Simon, 1979. "Price Adjustment and Market Structure," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 89(353), pages 96-108, March.
  8. Mark J. Zbaracki & Mark Bergen & Daniel Levy, 2006. "The Anatomy of a Price Cut: Discovering Organizational Sources of the Costs of Price Adjustment," Working Papers, Bar-Ilan University, Department of Economics 2006-3, Bar-Ilan University, Department of Economics.
  9. Caplin, A. & Leahy, J., 1989. "State-Dependent Pricing And The Dynamics Of Money And Output," Discussion Papers, Columbia University, Department of Economics 1989_32, Columbia University, Department of Economics.
  10. Ball, Laurence & Mankiw, N Gregory, 1995. "Relative-Price Changes as Aggregate Supply Shocks," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 110(1), pages 161-93, February.
  11. Andrew T. Young & Daniel Levy, 2013. "Explicit Evidence of an Implicit Contract," Working Papers, Bar-Ilan University, Department of Economics 2013-06, Bar-Ilan University, Department of Economics.
  12. Daniel Levy & Shantanu Dutta & Mark Bergen, 2002. "Heterogeneity in Price Rigidity: Evidence from a Case Study Using Micro-Level Data," Working Papers, Bar-Ilan University, Department of Economics 2002-09, Bar-Ilan University, Department of Economics.
  13. Robert C. Feenstra & Matthew D. Shapiro, 2003. "Scanner Data and Price Indexes," NBER Books, National Bureau of Economic Research, Inc, National Bureau of Economic Research, Inc, number feen03-1.
  14. Hannan, Timothy H & Berger, Allen N, 1991. "The Rigidity of Prices: Evidence from the Banking Industry," American Economic Review, American Economic Association, American Economic Association, vol. 81(4), pages 938-45, September.
  15. S. Baranzoni & P. Bianchi & L. Lambertini, 2000. "Market Structure," Working Papers 368, Dipartimento Scienze Economiche, Universita' di Bologna.
  16. Dennis W. Carlton, 1986. "The Rigidity of Prices," NBER Working Papers 1813, National Bureau of Economic Research, Inc.
  17. Pashigian, B Peter & Bowen, Brian, 1991. "Why Are Products Sold on Sale? Explanations of Pricing Regularities," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 106(4), pages 1015-38, November.
  18. Peter E. Rossi & Judith A. Chevalier & Anil K. Kashyap, 2002. "Why Don't Prices Rise During Periods of Peak Demand? Evidence from Scanner Data," Yale School of Management Working Papers, Yale School of Management ysm291, Yale School of Management.
  19. Laurence Ball & N. Gregory Mankiw, 1992. "Asymmetric Price Adjustment and Economic Fluctuations," NBER Working Papers 4089, National Bureau of Economic Research, Inc.
  20. Clay, Karen, et al, 2002. "Retail Strategies on the Web: Price and Non-price Competition in the Online Book Industry," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 50(3), pages 351-67, September.
  21. Daniel Levy & Shantanu Dutta & Mark Bergen & Robert Venable, 1998. "Price adjustment at multiproduct retailers," Managerial and Decision Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 19(2), pages 81-120.
  22. Gil S. Epstein, 2007. "Production, inventory and waiting time," Managerial and Decision Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 28(6), pages 579-589.
  23. Konieczny, Jerzy D. & Skrzypacz, Andrzej, 2005. "Inflation and price setting in a natural experiment," Journal of Monetary Economics, Elsevier, Elsevier, vol. 52(3), pages 621-632, April.
  24. Andrew Caplin & John Leahy, 1994. "The Economics of Adjustment," NBER Working Papers 4687, National Bureau of Economic Research, Inc.
  25. Neumark, David & Sharpe, Steven A, 1992. "Market Structure and the Nature of Price Rigidity: Evidence from the Market for Consumer Deposits," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 107(2), pages 657-80, May.
  26. Leif Danziger, 1998. "A Dynamic Economy with Costly Price Adjustment," Cahiers de recherche CREFE / CREFE Working Papers, CREFE, Université du Québec à Montréal 83, CREFE, Université du Québec à Montréal.
  27. Blanchard, Olivier Jean & Kiyotaki, Nobuhiro, 1987. "Monopolistic Competition and the Effects of Aggregate Demand," American Economic Review, American Economic Association, American Economic Association, vol. 77(4), pages 647-66, September.
  28. Economides, Nicholas, 1998. "The incentive for non-price discrimination by an input monopolist," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 16(3), pages 271-284, May.
  29. Georg Müller & Mark Bergen & Shantanu Dutta & Daniel Levy, 2005. "Private Label Price Rigidity during Holiday Periods," Macroeconomics, EconWPA 0503006, EconWPA.
  30. Levy, Daniel, et al, 1997. "The Magnitude of Menu Costs: Direct Evidence from Large U.S. Supermarket Chains," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 112(3), pages 791-825, August.
  31. Daniel Levy, 2006. "Price Rigidity and Flexibility: Recent Theoretical Developments," Emory Economics, Department of Economics, Emory University (Atlanta) 0608, Department of Economics, Emory University (Atlanta).
  32. Caplin, Andrew S & Spulber, Daniel F, 1987. "Menu Costs and the Neutrality of Money," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 102(4), pages 703-25, November.
  33. Gordon, Robert J, 1990. "What Is New-Keynesian Economics?," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 28(3), pages 1115-71, September.
  34. Leif Danziger, 2001. "Output and Welfare Effects of Inflation with Costly Price and Quantity Adjustments," American Economic Review, American Economic Association, American Economic Association, vol. 91(5), pages 1608-1620, December.
  35. Andersen, Torben M & Toulemonde, Eric, 2004. "Adapting Prices or Quantities in the Presence of Adjustment Costs?," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 36(2), pages 177-96, April.
  36. Bedrossian, Arakel & Moschos, Demetrios, 1988. "Industrial Structure, Concentration and the Speed of Price Adjustment," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 36(4), pages 459-76, June.
  37. 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.
  38. Carlton, Dennis W., 1989. "The theory and the facts of how markets clear: Is industrial organization valuable for understanding macroeconomics?," Handbook of Industrial Organization, Elsevier, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 15, pages 909-946 Elsevier.
  39. Bergen, Mark & Ritson, Mark & Dutta, Shantanu & Levy, Daniel & Zbaracki, Mark, 2003. "Shattering the Myth of Costless Price Changes," European Management Journal, Elsevier, Elsevier, vol. 21(6), pages 663-669, December.
  40. Fisher, Timothy C. G. & Konieczny, Jerzy D., 2006. "Inflation and Costly Price Adjustment: A Study of Canadian Newspaper Prices," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 38(3), pages 615-633, April.
  41. Geroski, P A, 1992. "Price Dynamics in UK Manufacturing: A Microeconomic View," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 59(236), pages 403-19, November.
  42. Ball, Laurence & Romer, David, 1991. "Sticky Prices as Coordination Failure," American Economic Review, American Economic Association, American Economic Association, vol. 81(3), pages 539-52, June.
  43. Warner, Elizabeth J & Barsky, Robert B, 1995. "The Timing and Magnitude of Retail Store Markdowns: Evidence from Weekends and Holidays," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 110(2), pages 321-52, May.
  44. Dennis W. Carlton, 1983. "Equilibrium Fluctuations When Price and Delivery Lag Clear the Market," Bell Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 14(2), pages 562-572, Autumn.
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, 2006. "Price Rigidity and Flexibility: New Empirical Evidence," Emory Economics, Department of Economics, Emory University (Atlanta) 0611, Department of Economics, Emory University (Atlanta).

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:wly:mgtdec:v:28:y:2007:i:7:p:817-832. 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.