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How Do Firms Set Prices? Survey Evidence from Ireland

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Author Info

  • Keeney, Mary J.

    (Central Bank and Financial Services Authority of Ireland)

  • Lawless, Martina

    (Central Bank and Financial Services Authority of Ireland)

  • Murphy, Alan

    (Central Bank and Financial Services Authority of Ireland)

Abstract

Despite 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 Info

Paper provided by Central Bank of Ireland in its series Research Technical Papers with number 7/RT/10.

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Length: 25 pages
Date of creation: May 2010
Date of revision:
Handle: RePEc:cbi:wpaper:7/rt/10

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. 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
  2. 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
  3. 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
  4. Mark-up Pricing in Western Europe: The Empirical Evidence
    by LK in Social Democracy for the 21st Century: A Post Keynesian Perspective on 2014-05-19 15:15:00
  5. Mark-up Pricing in 20 Nations and the Eurozone: the Empirical Evidence
    by LK in Social Democracy for the 21st Century: A Post Keynesian Perspective on 2014-05-20 08:15:00
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Cited by:
  1. Thorvardur Tjörvi Ólafsson & Ásgerdur Pétursdóttir & Karen Á. Vignisdóttir, . "Price setting in turbulent times. Survey evidence from Icelandic firms," Economics Working Papers, School of Economics and Management, University of Aarhus 2011-09, School of Economics and Management, University of Aarhus.
  2. Thorvardur Tjörvi Ólafsson & Ásgerdur Pétursdóttir & Karen Á. Vignisdóttir, 2011. "Price setting in turbulent times," Economics, Department of Economics, Central bank of Iceland wp54, Department of Economics, Central bank of Iceland.

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