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

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  • Bhattarai, Saroj
  • Schoenle, Raphael

Abstract

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.

Suggested Citation

  • Bhattarai, Saroj & Schoenle, Raphael, 2014. "Multiproduct firms and price-setting: Theory and evidence from U.S. producer prices," Journal of Monetary Economics, Elsevier, vol. 66(C), pages 178-192.
  • Handle: RePEc:eee:moneco:v:66:y:2014:i:c:p:178-192
    DOI: 10.1016/j.jmoneco.2014.05.002
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    More about this item

    Keywords

    Multi-product firms; Number of Goods; State-dependent pricing; U.S. Producer prices;

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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