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Price Rigidity and Flexibility: New Empirical Evidence - Introduction to the Special Issue

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  • Levy, Daniel

Abstract

The marketplace, along with its price system, is the single most important institution in a western‐style free enterprise economy. The ability of prices to adjust to changes in supply and demand conditions enables the market to function efficiently, and that ability lies behind the magical invisible hand mechanism. The behaviour of prices and in particular the ability of prices to adjust to changes in market conditions, therefore, have fundamental implications for many key issues in many areas of both microeconomics as well as macroeconomics. It is, therefore, critical to study and understand whether there are barriers to price adjustments, what are the nature of these barriers, how the barriers lead to price rigidity, what are the possible implications of these rigidities, etc. This introductory essay briefly summarizes the 14 empirical studies of price rigidity that are included in this special issue.

Suggested Citation

  • Levy, Daniel, 2007. "Price Rigidity and Flexibility: New Empirical Evidence - Introduction to the Special Issue," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 28(7 (Specia), pages 639-647.
  • Handle: RePEc:zbw:espost:206765
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    1. Daniel Levy & Haipeng Allan Chen & Sourav Ray & Mark Bergen, 2004. "Asymmetric Price Adjustment "in the Small:" An Implication of Rational Inattention," Macroeconomics 0407012, University Library of Munich, Germany, revised 11 May 2005.
    2. Levy, Daniel & Bergen, Mark & Dutta, Shantanu & Venable, Robert, 1997. "The Magnitude of Menu Costs: Direct Evidence from Large U.S. Supermarket Chains," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 112(3), pages 791-824.
    3. Dutta, Shantanu, et al, 1999. "Menu Costs, Posted Prices, and Multiproduct Retailers," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 31(4), pages 683-703, November.
    4. Levy, Daniel & Müller, Georg & Chen, Haipeng (Allan) & Bergen, Mark & Dutta, Shantanu, 2010. "Holiday Price Rigidity and Cost of Price Adjustment," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 77(305), pages 172-198.
    5. Lach, Saul & Tsiddon, Daniel, 1996. "Staggering and Synchronization in Price-Setting: Evidence from Multiproduct Firms," American Economic Review, American Economic Association, vol. 86(5), pages 1175-1196, December.
    6. Robert B. Barsky & Mark Bergen & Shantanu Dutta & Daniel Levy, 2003. "What Can the Price Gap between Branded and Private-Label Products Tell Us about Markups?," NBER Chapters, in: Scanner Data and Price Indexes, pages 165-225, National Bureau of Economic Research, Inc.
    7. Mark J. Zbaracki & Mark Ritson & Daniel Levy & Shantanu Dutta & Mark Bergen, 2004. "Managerial and Customer Costs of Price Adjustment: Direct Evidence from Industrial Markets," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 514-533, May.
    8. Ray, Sourav & Chen, Haipeng (Allan) & Bergen, Mark & Levy, Daniel, 2006. "Asymmetric Wholesale Pricing: Theory and Evidence," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 25(2), pages 109-201.
    9. 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, vol. 100(2), pages 349-389, April.
    10. Georg Müller & Mark Bergen & Shantanu Dutta & Daniel Levy, 2007. "Non-price rigidity and cost of adjustment," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(7), pages 817-832.
    11. Sascha A. Weber & Sven M. Anders, 2007. "Price rigidity and market power in German retailing," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(7), pages 737-749.
    12. Levy, Daniel & Young, Andrew T., 2004. ""The Real Thing:" Nominal Price Rigidity of the Nickel Coke, 1886-1959," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 36(4 (Specia), pages 765-799.
    13. Michael C. Davis, 2007. "The dynamics of daily retail gasoline prices," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(7), pages 713-722.
    14. Levy, Daniel, 2007. "Price Rigidity and Flexibility: Recent Theoretical Developments - Introduction to the Special Issue," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 28(6 (Specia), pages 523-530.
    15. Young, Andrew T. & Levy, Daniel, 2014. "Explicit Evidence of an Implicit Contract," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 30(4), pages 804-832.
    16. Dutta, Shantanu & Bergen, Mark & Levy, Daniel, 2002. "Price flexibility in channels of distribution: Evidence from scanner data," Journal of Economic Dynamics and Control, Elsevier, vol. 26(11), pages 1845-1900, September.
    17. Linda A. Toolsema & Jan P. A. M. Jacobs, 2007. "Why do prices rise faster than they fall? With an application to mortgage rates," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(7), pages 701-712.
    18. Bergen, Mark & Ritson, Mark & Dutta, Shantanu & Levy, Daniel & Zbaracki, Mark, 2003. "Shattering the Myth of Costless Price Changes," European Management Journal, Elsevier, vol. 21(6), pages 663-669, December.
    19. Müller, Georg & Bergen, Mark & Dutta, Shantanu & Levy, Daniel, 2006. "Private Label Price Rigidity during Holiday Periods," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 13(1), pages 57-62.
    20. Anil K Kashyap, 1995. "Sticky Prices: New Evidence from Retail Catalogs," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(1), pages 245-274.
    21. Kostas Axarloglou, 2007. "Thick markets, market competition and pricing dynamics: evidence from retailers," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(7), pages 669-677.
    22. Müller, Georg & Bergen, Mark & Dutta, Shantanu & Levy, Daniel, 2007. "Holiday Non-Price Rigidity and Cost of Adjustment," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 28(7 (Specia), pages 817-832.
    23. Levy, Daniel & Dutta, Shantanu & Bergen, Mark & Venable, Robert, 1998. "Price Adjustment at Multiproduct Retailers," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 19(2), pages 81-120.
    24. Matthias R. Fengler & Joachim K. Winter, 2007. "Price variability and price dispersion in a stable monetary environment: evidence from German retail markets," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(7), pages 789-801.
    25. Levy, Daniel & Dutta, Shantanu & Bergen, Mark, 2002. "Heterogeneity in Price Rigidity: Evidence from a Case Study Using Microlevel Data," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(1), pages 197-220, February.
    26. Sam Peltzman, 2000. "Prices Rise Faster than They Fall," Journal of Political Economy, University of Chicago Press, vol. 108(3), pages 466-502, June.
    27. Dennis W. Carlton, 1983. "Equilibrium Fluctuations When Price and Delivery Lag Clear the Market," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 562-572, Autumn.
    28. Carlton, Dennis W, 1986. "The Rigidity of Prices," American Economic Review, American Economic Association, vol. 76(4), pages 637-658, September.
    29. Georg Müller & Sourav Ray, 2007. "Asymmetric price adjustment: evidence from weekly product-level scanner price data," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(7), pages 723-736.
    30. Eytan Sheshinski & Yoram Weiss (ed.), 1993. "Optimal Pricing, Inflation, and the Cost of Price Adjustment," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262193329, December.
    31. Saul Lach & Daniel Tsiddon, 2007. "Small price changes and menu costs," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(7), pages 649-656.
    32. 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 2006-3, Bar-Ilan University, Department of Economics.
    33. Michael J. Hicks, 2007. "Hierarchical delays as a source of nominal price rigidities: evidence from the microcomputer industry," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(7), pages 803-815.
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    Cited by:

    1. Young, Andrew T. & Levy, Daniel, 2014. "Explicit Evidence of an Implicit Contract," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 30(4), pages 804-832.
    2. Daniel Levy & Frank Smets, 2010. "Price setting and price adjustment in some European Union Countries: introduction to the special issue," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 31(2-3), pages 63-66.
    3. Levy, Daniel & Smets, Frank, 2010. "Price Setting and Price Adjustment in Some European Union Countries," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 31(2‐3 (Spec), pages 63-66.

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    More about this item

    Keywords

    Price Rigidity; Price Flexibility; Cost of Price Adjustment; Menu Cost; Managerial and Customer Cost of Price Adjustment; Pricing; Price System; Price Setting; New Keynesian Economics; Store-Level Data; Micro-Level Data;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • 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
    • M20 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - General
    • M30 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - General

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