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Yesterday's bad times are today's good old times: retail price changes in the 1890s were smaller, less frequent, and more permanent

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  • Alan Kackmeister

Abstract

This paper compares nominal price rigidity in retail stores during two 28-month periods: 1889-1891 and 1997-1999. The 1889-1891 microdata price quotes show: 1. a lower frequency of price changes; 2. a smaller average magnitude of price changes; 3. fewer "small" price changes; and, 4. fewer temporary price reductions. These differences are consistent with the 1889-1891 period having a higher cost of changing prices resulting in less adjustment to transitory price shocks. Changes in the retailing environment that may have led to a higher cost of changing prices in 1889-1891 are discussed.

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Bibliographic Info

Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Finance and Economics Discussion Series with number 2005-18.

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Date of creation: 2005
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Handle: RePEc:fip:fedgfe:2005-18

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Keywords: Retail trade ; Prices;

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  1. John B. Taylor, 1998. "Staggered Price and Wage Setting in Macroeconomics," NBER Working Papers 6754, National Bureau of Economic Research, Inc.
  2. Mark Zbaracki & Mark Ritson & Daniel Levy & Shantanu Dutta & Mark Bergen, 2004. "Managerial and Customer Costs of Price Adjustment: Direct Evidence from Industrial Markets," Macroeconomics 0402020, EconWPA.
  3. Laurence Ball & N. Gregory Mankiw, 1994. "A sticky-price manifesto," Proceedings, Federal Reserve Bank of Dallas, issue Apr.
  4. Harold Barger, 1955. "Distribution's Place in the American Economy Since 1869," NBER Books, National Bureau of Economic Research, Inc, number barg55-1, July.
  5. Anil K. Kashyap, 1991. "Sticky prices: new evidence from retail catalogs," Working Paper Series, Macroeconomic Issues 91-26, Federal Reserve Bank of Chicago.
  6. Pashigian, B Peter, 1988. "Demand Uncertainty and Sales: A Study of Fashion and Markdown Pricin g," American Economic Review, American Economic Association, vol. 78(5), pages 936-53, December.
  7. Goodwin, Barry K. & Grennes, Thomas J. & Craig, Lee A., 2002. "Mechanical Refrigeration and the Integration of Perishable Commodity Markets," Explorations in Economic History, Elsevier, vol. 39(2), pages 154-182, April.
  8. Levy, Daniel, et al, 1997. "The Magnitude of Menu Costs: Direct Evidence from Large U.S. Supermarket Chains," The Quarterly Journal of Economics, MIT Press, vol. 112(3), pages 791-825, August.
  9. Lal, Rajiv & Matutes, Carmen, 1994. "Retail Pricing and Advertising Strategies," The Journal of Business, University of Chicago Press, vol. 67(3), pages 345-70, July.
  10. Koelln, K. & Rush, M., 1990. "Rigid Prices And Flexible Products," Papers 90-1, Florida - College of Business Administration.
  11. Thompson, Gary D. & Wilson, Paul N., 1999. "Market Demands For Bagged, Refrigerated Salads," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 24(02), December.
  12. Buckle, Robert A. & Carlson, John A., 2000. "Menu costs, firm size and price rigidity," Economics Letters, Elsevier, vol. 66(1), pages 59-63, January.
  13. Stigler, George J & Kindahl, James K, 1973. "Industrial Prices, as Administered by Dr. Means," American Economic Review, American Economic Association, vol. 63(4), pages 717-21, September.
  14. Warner, Elizabeth J & Barsky, Robert B, 1995. "The Timing and Magnitude of Retail Store Markdowns: Evidence from Weekends and Holidays," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 321-52, May.
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Cited by:
  1. Andrew T. Young & Daniel Levy, 2005. "Explicit Evidence on an Implicit Contract," Emory Economics 0519, Department of Economics, Emory University (Atlanta).
  2. Andrew T. Young & Alexander K. Blue, 2007. "Retail prices during a change in monetary regimes: evidence from Sears, Roebuck catalogs, 1938-1951," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(7), pages 763-775.
  3. Patrick Lünnemann & Thomas Y. Mathä, 2010. "Consumer price behaviour: evidence from Luxembourg micro data," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 31(2-3), pages 177-192.
  4. Midrigan, Virgiliu, 2006. "Menu costs, multi-product firms, and aggregate fluctuations," CFS Working Paper Series 2007/13, Center for Financial Studies (CFS).
  5. Virgiliu Midrigan, 2005. "Menu Costs, Multi-Product Firms and Aggregate Fluctuations," Macroeconomics 0511004, EconWPA.
  6. Eckard, E. Woodrow, 2007. "Retail price concentration, transaction costs, and price flexibility circa 1900," Explorations in Economic History, Elsevier, vol. 44(1), pages 131-153, January.

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