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Price Rigidity in Europe and the US: A Comparative Analysis Using Scanner Data

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  • Dirk Van den Poel

    (Ghent University)

  • Benjamin Verhelst

    (Ghent University)

Abstract

This paper uses scanner data from two large retailers to offer new insights into the extent of price rigidity in Europe and the US. Recent empirical research in this field has made extensive use of monthly data to study price stickiness and to control for the impact of temporary sales. We show that the use of monthly data is potentially highly misleading. We employ scanner data in (bi)weekly frequency and highlight the importance of high frequency data in studying price rigidity. Regular prices show roughly the same degree of flexibility in Europe and the US, in line with recent empirical research, when we study monthly price series derived from our high frequency scanner data. This finding collapses, however, when the original scanner datasets in higher base frequency are examined. Regular prices are then far more flexible in the US than in Europe. This result is robust to the type of sales filter that we apply and the statistic used to capture price rigidity. Taking this result to the macroeconomic level, it implies that countries where flexible short-term pricing strategies are used extensively could mistakenly be classified as rigid when studying monthly data.

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Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2011 Meeting Papers with number 524.

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Date of creation: 2011
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Handle: RePEc:red:sed011:524

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Cited by:
  1. B. Verhelst & D. Van Den Poel, 2012. "Implicit Contracts and Price Stickiness: Evidence from Customer-Level Scanner Data," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 12/776, Ghent University, Faculty of Economics and Business Administration.
  2. B. Verhelst & D. Van Den Poel, 2012. "Deep Habits in Consumption: A Spatial Panel Analysis Using Scanner Data," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 12/823, Ghent University, Faculty of Economics and Business Administration.

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