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Price Rigidity and Flexibility: New Empirical Evidence

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  • Daniel Levy

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 lies behind the magical invisible hand mechanism. To the behavior of prices and in particular to 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 possible implications of these rigidities, etc. This introductory essay briefly summarizes the fourteen empirical studies of price rigidity that are included in this special issue.

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Paper provided by Department of Economics, Emory University (Atlanta) in its series Emory Economics with number 0611.

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Date of creation: Sep 2006
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Handle: RePEc:emo:wp2003:0611

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  1. Toolsema, Linda A. & Jacobs, Jan, 2001. "Why do prices rise faster than they fall? : with an application to mortgage rates," CCSO Working Papers 200106, University of Groningen, CCSO Centre for Economic Research.
  2. Judith A. Chevalier & Anil K. Kashyap & Peter E. Rossi, 2003. "Why Don't Prices Rise During Periods of Peak Demand? Evidence from Scanner Data," American Economic Review, American Economic Association, vol. 93(1), pages 15-37, March.
  3. Georg Müller & Mark Bergen & Shantanu Dutta & Daniel Levy, 2005. "Private Label Price Rigidity during Holiday Periods," Macroeconomics 0503006, EconWPA.
  4. 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, Department of Economics, Bar-Ilan University.
  5. Fengler, Matthias R. & Winter, Joachim, 2007. "Price variability and price dispersion in a stable monetary environment: Evidence from German retail markets," Munich Reprints in Economics 20338, University of Munich, Department of Economics.
  6. Daniel Levy & Shantanu Dutta & Mark Bergen, 2004. "Heterogeneity in Price Rigidity: Evidence from a Case Study Using Micro-Level Data," Macroeconomics 0402021, EconWPA.
  7. Andrew T. Young & Daniel Levy, 2005. "Explicit Evidence on an Implicit Contract," Working Papers 2005-04, Department of Economics, Bar-Ilan University.
  8. Anil K Kashyap, 1994. "Sticky Prices: New Evidence from Retail Catalogs," NBER Working Papers 4855, National Bureau of Economic Research, Inc.
  9. Daniel Levy & Georg Muller & Shantanu Dutta & Mark Bergen, 2002. "Holiday Price Rigidity and Cost of Price Adjustment," Emory Economics 0208, Department of Economics, Emory University (Atlanta).
  10. Robert Barsky & Mark Bergen & Shantanu Dutta & Daniel Levy, 2002. "What Can the Price Gap between Branded and Private Label Products Tell Us about Markups?," Working Papers 2002-02, Department of Economics, Bar-Ilan University.
  11. Daniel Levy & Frank Smets, 2010. "Price Setting and Price Adjustment in Some European Union Countries: Introduction to the Special Issue," Working Papers 2010-22, Department of Economics, Bar-Ilan University.
  12. Daniel Levy, 2006. "Price Rigidity and Flexibility: Recent Theoretical Developments," Emory Economics 0608, Department of Economics, Emory University (Atlanta).
  13. Robert J. Kauffman & Charles A. Wood, 2007. "Follow the leader: price change timing in Internet-based selling," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(7), pages 679-700.
  14. Daniel Levy & Mark Bergen & Shantanu Dutta & Robert Venable, 2005. "The Magnitude of Menu Costs: Direct Evidence from Large U.S. Supermarket Chains," Macroeconomics 0505012, EconWPA.
  15. 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.
  16. Weber, Sascha A. & Anders, Sven, 2007. "Price Rigidity and Market Power in German Retailing," Discussion Papers 31, Justus Liebig University Giessen, Center for international Development and Environmental Research (ZEU).
  17. Carlton, Dennis W, 1986. "The Rigidity of Prices," American Economic Review, American Economic Association, vol. 76(4), pages 637-58, September.
  18. 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 349-89, April.
  19. Sheshinski, Eytan & Weiss, Yoram, 1977. "Inflation and Costs of Price Adjustment," Review of Economic Studies, Wiley Blackwell, vol. 44(2), pages 287-303, June.
  20. 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.
  21. 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.
  22. 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.
  23. Daniel Levy & Sourav Ray & Haipeng (Allan) Chen & Mark Bergen, 2007. "Asymmetric Price Adjustment in the Small," Emory Economics 0703, Department of Economics, Emory University (Atlanta).
  24. 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.
  25. 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.
  26. Sebnem Bahadir-Lust & Jens-Peter Loy & Christoph R. Weiss, 2007. "Are they always offering the lowest price? An empirical analysis of the persistence of price dispersion in a low inflation environment," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(7), pages 777-788.
  27. 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.
  28. Robert C. Feenstra & Matthew D. Shapiro, 2003. "Scanner Data and Price Indexes," NBER Books, National Bureau of Economic Research, Inc, number feen03-1, July.
  29. Sam Peltzman, 2000. "Prices Rise Faster than They Fall," Journal of Political Economy, University of Chicago Press, vol. 108(3), pages 466-502, June.
  30. Sourav Ray & Haipeng (Allan) Chen & Mark Bergen & Daniel Levy, 2005. "Asymmetric Wholesale Pricing: Theory and Evidence," Emory Economics 0513, Department of Economics, Emory University (Atlanta).
  31. Daniel Levy & Shantanu Dutta & Mark Bergen & Robert Venable, 1998. "Price adjustment at multiproduct retailers," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 19(2), pages 81-120.
  32. Varian, Hal R, 1980. "A Model of Sales," American Economic Review, American Economic Association, vol. 70(4), pages 651-59, September.
  33. Attila Rátfai, 2007. "The frequency and size of price adjustment: microeconomic evidence," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(7), pages 751-762.
  34. 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.
  35. 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.
  36. 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 1175-96, December.
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Cited by:
  1. Levy, Daniel & Smets, Frank, 2010. "Price Setting and Price Adjustment in Some European Union Countries: Introduction to the Special Issue," MPRA Paper 27617, University Library of Munich, Germany.
  2. Daniel Levy, 2006. "Price Rigidity and Flexibility: Recent Theoretical Developments," Emory Economics 0608, Department of Economics, Emory University (Atlanta).
  3. Christopher Douglas & Ana Mar�a Herrera, 2010. "Why are gasoline prices sticky? A test of alternative models of price adjustment," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 25(6), pages 903-928.

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