How do individual UK consumer prices behave?
AbstractThis paper examines the behaviour of individual consumer prices in the United Kingdom, and uncovers a number of stylised facts about pricing behaviour. First, on average 19% of prices change each month, although this falls to 15% if sales are excluded. Second, the probability of price changes is not constant over time. Third, goods prices change more frequently than services prices. Fourth, the distribution of price changes is wide, although a significant number of changes are relatively small and close to zero. Fifth, prices that change more frequently tend to do so by less. We find that conventional pricing theories struggle to match these results, particularly the marked heterogeneity, which argues against the use of ‘representative agent’ models.
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Bibliographic InfoPaper provided by Bank of England in its series Bank of England working papers with number 438.
Length: 40 pages
Date of creation: 31 Oct 2011
Date of revision:
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More information through EDIRC
Consumer prices; price-setting behaviour.;
Find related papers by JEL classification:
- D40 - Microeconomics - - Market Structure and Pricing - - - General
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-11-07 (All new papers)
- NEP-CBA-2011-11-07 (Central Banking)
- NEP-HME-2011-11-07 (Heterodox Microeconomics)
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