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Price stickiness and strategic uncertainty: An experimental study

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  • Funaki, Yukihiko
  • Kawamura, Kohei
  • Ueda, Kozo
  • Uto, Nobuyuki

Abstract

We identify a minimal set of components to generate price stickiness by a laboratory experiment on an oligopolistic price setting game. Our design involves repeated aggregate shocks to the market but features no uncertainty in their timing and magnitude, no real-nominal distinction, or no need to compute the best response to the prices of the other subjects. We find persistent price stickiness when prices are strategic complements and fully anticipated shocks lower the equilibrium price. By exploring the causes of the observed downward stickiness, we find that it stems from strategic uncertainty regarding beliefs about others' prices, compounded by strategic complementarity and an asymmetric payoff structure.

Suggested Citation

  • Funaki, Yukihiko & Kawamura, Kohei & Ueda, Kozo & Uto, Nobuyuki, 2025. "Price stickiness and strategic uncertainty: An experimental study," Journal of Economic Dynamics and Control, Elsevier, vol. 180(C).
    • Handle: RePEc:eee:dyncon:v:180:y:2025:i:c:s0165188925001526
    DOI: 10.1016/j.jedc.2025.105186
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    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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