Magazine prices revisited
AbstractThis paper examines price adjustment behavior in the magazine industry. In a frequently cited study, Cecchetti (1986) constructs a reduced-form (S,s) model for firms. Cecchetti assumes that a firm's pricing rules are fixed for non-overlapping three-year intervals and estimates the model using a conditional logit specification from Chamberlain (1980). The estimates are inconsistent, however, due to the state-dependent specification of the model. I illustrate the econometric problems in Cecchetti's results through a Monte Carlo exercise and then suggest a method for producing consistent estimates based upon Heckman and Singer (1984). The corrected results provide strong support for models of state-dependent pricing.
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Bibliographic InfoPaper provided by Federal Reserve Bank of Kansas City in its series Research Working Paper with number RWP 01-15.
Date of creation: 2001
Date of revision:
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- NEP-ALL-2002-04-25 (All new papers)
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