How Do Firms Set Prices? Survey Evidence from Ireland
AbstractDespite the importance of understanding and estimating the “stickiness” of prices of goods and services, empirical assessment of price setting behaviour by firms has remained relatively limited. This is the first paper to provide detailed information on the pressures, manner and frequency with which Irish firms adjust their output prices. Using survey information from almost a thousand Irish firms, we present a number of stylised facts on price setting behaviour. One of the first of these relates to the level of control firms have over their pricing strategy – the most common approach for firms is to set a price based on costs and a self-determined profit margin. However, one-third of firms said that their price was set primarily by following that of their closest competitors. The perceived intensity of competition was found to be one of the most significant factors in determining the price-setting approach and is also a central factor in determining price changes
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Bibliographic InfoPaper provided by Central Bank of Ireland in its series Research Technical Papers with number 7/RT/10.
Length: 25 pages
Date of creation: May 2010
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-05-29 (All new papers)
- NEP-COM-2010-05-29 (Industrial Competition)
- NEP-IND-2010-05-29 (Industrial Organization)
You can help add them by filling out this form.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Mark-up Pricing in Ireland
by Lord Keynes in Social Democracy for the 21st Century: A Post Keynesian Perspective on 2013-11-22 20:09:00
- Callahan on Price Rigidity
by Lord Keynes in Social Democracy for the 21st Century: A Post Keynesian Perspective on 2014-02-04 11:55:00
- Mark-up Pricing in 12 Nations: the Empirical Evidence
by Lord Keynes in Social Democracy for the 21st Century: A Post Keynesian Perspective on 2014-02-18 13:16:00
- Thorvardur Tjörvi Ólafsson & Ásgerdur Pétursdóttir & Karen Á. Vignisdóttir, . "Price setting in turbulent times. Survey evidence from Icelandic firms," Economics Working Papers 2011-09, School of Economics and Management, University of Aarhus.
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