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Price setting in a leading Swiss online supermarket

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  • Martin Berka
  • Michael B. Devereux
  • Thomas Rudolph

Abstract

We study a newly released data set of scanner prices for food products in a large Swiss online supermarket. We find that average prices change about every two months, but when we exclude temporary sales, prices are extremely sticky, changing on average once every three years. Non-sale price behavior is broadly consistent with menu cost models of sticky prices. When we focus specifically on the behavior of sale prices, however, we find that the characteristics of price adjustment seems to be substantially at odds with standard theory.

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Paper provided by Federal Reserve Bank of Dallas in its series Globalization and Monetary Policy Institute Working Paper with number 83.

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Date of creation: 2011
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Handle: RePEc:fip:feddgw:83

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Keywords: Pricing ; Profit;

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  1. Eyal Baharad & Benjamin Eden, 2003. "Price Rigidity and Price Dispersion: Evidence from Micro Data," Vanderbilt University Department of Economics Working Papers 0321, Vanderbilt University Department of Economics.
  2. Peter J. Klenow & Oleksiy Kryvtsov, 2005. "State-Dependent or Time-Dependent Pricing: Does it Matter for Recent U.S. Inflation?," NBER Working Papers 11043, National Bureau of Economic Research, Inc.
  3. Kevin Sheedy & Bernardo Guimaraes, 2009. "Sales and Monetary Policy," 2009 Meeting Papers, Society for Economic Dynamics 365, Society for Economic Dynamics.
  4. Emi Nakamura, 2008. "Pass-Through in Retail and Wholesale," American Economic Review, American Economic Association, American Economic Association, vol. 98(2), pages 430-37, May.
  5. Mikhail Golosov & Robert E. Lucas, 2003. "Menu Costs and Phillips Curves," NBER Working Papers 10187, National Bureau of Economic Research, Inc.
  6. Patrick J. Kehoe & Virgiliu Midrigan, 2010. "Prices are Sticky After All," NBER Working Papers 16364, National Bureau of Economic Research, Inc.
  7. Mark Bils & Peter J. Klenow, 2004. "Some Evidence on the Importance of Sticky Prices," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 112(5), pages 947-985, October.
  8. Emi Nakamura & Jón Steinsson, 2008. "Monetary Non-Neutrality in a Multi-Sector Menu Cost Model," NBER Working Papers 14001, National Bureau of Economic Research, Inc.
  9. Diewert, Erwin & Fox, Kevin J. & Ivancic, Lorraine, 2009. "Scanner Data, Time Aggregation and the Construction of Price Indexes," Economics working papers, Vancouver School of Economics erwin_diewert-2009-48, Vancouver School of Economics, revised 22 Sep 2009.
  10. Judith A. Chevalier & Anil K. Kashyap & Peter E. Rossi, 2000. "Why Don't Prices Rise During Periods of Peak Demand? Evidence from Scanner Data," NBER Working Papers 7981, National Bureau of Economic Research, Inc.
  11. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, Elsevier, vol. 12(3), pages 383-398, September.
  12. Mark Gertler & John Leahy, 2006. "A Phillips curve with an Ss foundation," Working Papers 06-8, Federal Reserve Bank of Philadelphia.
  13. Emi Nakamura & Jón Steinsson, 2008. "Five Facts about Prices: A Reevaluation of Menu Cost Models," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 123(4), pages 1415-1464, November.
  14. Martin Eichenbaum & Nir Jaimovich & Sergio Rebelo, 2011. "Reference Prices, Costs, and Nominal Rigidities," American Economic Review, American Economic Association, American Economic Association, vol. 101(1), pages 234-62, February.
  15. Judith A. Chevalier & Anil K Kashyap, 2011. "Best Prices," NBER Working Papers 16680, National Bureau of Economic Research, Inc.
  16. Christian Broda & David E. Weinstein, 2007. "Product Creation and Destruction: Evidence and Price Implications," NBER Working Papers 13041, National Bureau of Economic Research, Inc.
  17. Sheshinski, Eytan & Weiss, Yoram, 1977. "Inflation and Costs of Price Adjustment," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 44(2), pages 287-303, June.
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Cited by:
  1. Chakraborty, Ratula & Dobson, Paul & Seaton, Jonathan S. & Waterson, Michael, 2011. "Pricing in inflationary times- the penny drops," The Warwick Economics Research Paper Series (TWERPS) 975, University of Warwick, Department of Economics.

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