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Multiproduct firms and price-setting: Theory and evidence from U.S. producer prices

Listed author(s):
  • Bhattarai, Saroj
  • Schoenle, Raphael

Using micro-data on U.S. producer prices, we establish three new facts about price setting by multi-product firms. First, firms selling more goods adjust prices more frequently but on average by smaller amounts. Moreover, their fraction of positive price changes is lower and the dispersion of price changes is higher. Second, price changes within firms are substantially synchronized, which plays a dominant role in explaining pricing dynamics. Third, firms selling more goods have greater within-firm synchronization of price changes. A model with trend inflation and firm-specific menu costs where firms are subject to idiosyncratic and aggregate shocks matches the empirical findings.

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File URL: http://www.sciencedirect.com/science/article/pii/S0304393214000774
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Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 66 (2014)
Issue (Month): C ()
Pages: 178-192

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Handle: RePEc:eee:moneco:v:66:y:2014:i:c:p:178-192
DOI: 10.1016/j.jmoneco.2014.05.002
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505566

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