Reassessing Sticky Price Models through the Lens of Scraped Price Data

What micro facts of price changes should be considered in the incorporation of price rigidities into macro models? To answer this, I exploit a novel micro data set obtained with web scraping techniques, containing daily prices of eight retailers from six countries with heterogeneous macroeconomic conditions. I find that: (1) There is a relation between the main statistics (related to the size and frequency of price adjustment) and the inflation rate of a country; (2) The distribution of the size of price changes has a relatively small, yet nontrivial mass around zero; (3) Familiar products from the same manufacturer have greater similarity in the timing and magnitude of price adjustment than heterogeneous products. I show that incorporating a three-dimensional cost –composed by a general cost, a product-specific cost, and a cost curtail for price changes in familiar products– makes an otherwise standard menu cost model reproduce these facts.