The pricing behaviour of Italian firms: new survey evidence on price stickiness
AbstractThis study examines price setting behaviour of Italian firms on the basis of the results of a survey conducted by Banca d’Italia in early 2003 on a sample of around 350 firms belonging to all economic sectors. Prices are mostly fixed following standard mark-up rules, although customer-specific characteristics have a role, in particular in manufacturing and services where price discrimination across customers matters. Rival prices mostly affect pricesetting strategies in industrial firms. In reviewing their prices, firms follow either state-dependent rules or a combination of time and state-dependent ones. Concerning the frequency of price adjustments, a considerable degree of stickiness emerges both at the stage in which firms evaluate their pricing strategies and the stage in which they actually implement the price change. In 2002 most firms changed their price only once. Three alternative explanations of nominal rigidity are ranked highest by the firms interviewed: explicit contracts, tacit collusive behaviour and the perception of the temporary nature of the shock. Prices respond asymmetrically to shocks, depending on the direction of the adjustment (positive vs negative) and the source of the shock (demand vs supply). Real rigidities – captured by the degree of market competition, customers’ search costs, the sensitivity of profits to changes in demand – play an important role in determining this asymmetry. Moreover, whereas cost shocks impact more when prices have to be raised than when they have to be reduced, demand decreases are more likely to induce a price change than demand increases. JEL Classification: E30, D40
Download InfoIf 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.
Bibliographic InfoPaper provided by European Central Bank in its series Working Paper Series with number 0333.
Date of creation: Apr 2004
Date of revision:
Contact details of provider:
Postal: Postfach 16 03 19, Frankfurt am Main, Germany
Phone: +49 69 1344 0
Fax: +49 69 1344 6000
Web page: http://www.ecb.europa.eu/home/html/index.en.html
More information through EDIRC
Postal: Press and Information Division, European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany
Other versions of this item:
- Silvia Fabiani & Angela Gattulli & Roberto Sabbatini, 2004. "The pricing behaviour of Italian firms: new survey evidence on price stickiness," Temi di discussione (Economic working papers) 515, Bank of Italy, Economic Research and International Relations Area.
- E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
- D40 - Microeconomics - - Market Structure and Pricing - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-10-04 (All new papers)
- NEP-EEC-2005-10-04 (European Economics)
- NEP-IND-2005-10-04 (Industrial Organization)
- NEP-MAC-2005-10-04 (Macroeconomics)
- NEP-MIC-2005-10-04 (Microeconomics)
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.:
- Domenico J. Marchetti & Francesco Nucci, 2004. "Pricing behavior and the comovement of productivity and labor: evidence from firm-level data," Temi di discussione (Economic working papers) 524, Bank of Italy, Economic Research and International Relations Area.
- Simon Hall & Anthony Yates, 1998. "Are there downward nominal rigidities in product markets?," Bank of England working papers 80, Bank of England.
- Hall, Simon & Walsh, Mark & Yates, Anthony, 2000. "Are UK Companies' Prices Sticky?," Oxford Economic Papers, Oxford University Press, vol. 52(3), pages 425-46, July.
- Anthony Yates, 1998. "Downward nominal rigidity and monetary policy," Bank of England working papers 82, Bank of England.
- Martin, Christopher, 1993. "Price adjustment and market structure," Economics Letters, Elsevier, vol. 41(2), pages 139-143.
- Kashyap, Anil K, 1995.
"Sticky Prices: New Evidence from Retail Catalogs,"
The Quarterly Journal of Economics,
MIT Press, vol. 110(1), pages 245-74, February.
- Anil K Kashyap, 1994. "Sticky Prices: New Evidence from Retail Catalogs," NBER Working Papers 4855, National Bureau of Economic Research, Inc.
- Anil K. Kashyap, 1991. "Sticky prices: new evidence from retail catalogs," Working Paper Series, Macroeconomic Issues 91-26, Federal Reserve Bank of Chicago.
- Anil K. Kashyap, 1990. "Sticky prices: new evidence from retail catalogs," Finance and Economics Discussion Series 112, Board of Governors of the Federal Reserve System (U.S.).
- Ball, Laurence & Romer, David, 1990.
"Real Rigidities and the Non-neutrality of Money,"
Review of Economic Studies,
Wiley Blackwell, vol. 57(2), pages 183-203, April.
- Alan S. Blinder, 1994. "On Sticky Prices: Academic Theories Meet the Real World," NBER Chapters, in: Monetary Policy, pages 117-154 National Bureau of Economic Research, Inc.
- Apel, Mikael & Friberg, Richard & Hallsten, Kerstin, 2001.
"Micro Foundations of Macroeconomic Price Adjustment: Survey Evidence from Swedish Firms,"
Working Paper Series
128, Sveriges Riksbank (Central Bank of Sweden).
- Apel, Mikael & Friberg, Richard & Hallsten, Kerstin, 2005. "Microfoundations of Macroeconomic Price Adjustment: Survey Evidence from Swedish Firms," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(2), pages 313-38, April.
- Simon Hall & Mark Walsh & Anthony Yates, 1997. "How do UK companies set prices?," Bank of England working papers 67, Bank of England.
- Eugenio Gaiotti, 2004.
"Pitfalls of monetary policy under incomplete information: imprecise indicators and real indeterminacy,"
0404017, EconWPA, revised 26 Apr 2004.
- Eugenio Gaiotti, 2004. "Pitfalls of monetary policy under incomplete information: imprecise indicators and real indeterminacy," Temi di discussione (Economic working papers) 488, Bank of Italy, Economic Research and International Relations Area.
- Franco Mostacci & Roberto Sabbatini, 2003. "L 'euro ha creato inflazione? Changeover e arrotondamenti dei prezzi al consumo in Italia nel 2002," Moneta e Credito, Economia civile, vol. 56(221), pages 45-95.
- Mark Bils & Peter J. Klenow, 2002.
"Some Evidence on the Importance of Sticky Prices,"
NBER Working Papers
9069, National Bureau of Economic Research, Inc.
- Cecchetti, Stephen G., 1986. "The frequency of price adjustment : A study of the newsstand prices of magazines," Journal of Econometrics, Elsevier, vol. 31(3), pages 255-274, April.
- Dennis W. Carlton, 1986.
"The Rigidity of Prices,"
NBER Working Papers
1813, National Bureau of Economic Research, Inc.
- Taylor, John B., 1999.
"Staggered price and wage setting in macroeconomics,"
Handbook of Macroeconomics,
in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 15, pages 1009-1050
- John B. Taylor, 1998. "Staggered Price and Wage Setting in Macroeconomics," NBER Working Papers 6754, National Bureau of Economic Research, Inc.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral 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: (Official Publications).
If references are entirely missing, you can add them using this form.