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Sticky prices: why firms hesitate to adjust the price of their goods

Author

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  • Pinelopi K. Goldberg
  • Rebecca Hellerstein

Abstract

Price stickiness—the tendency of prices to remain constant despite changes in supply and demand—has been linked to firms’ unwillingness to pay the costs entailed in setting, implementing, and advertising new prices. However, there is little consensus on the size and importance of these “repricing costs.” Taking the imported beer market as their subject, the authors of this study find repricing costs to be markedly higher for manufacturers than for retailers and conclude that, at the wholesale level, these costs are a significant deterrent to price adjustment.

Suggested Citation

  • Pinelopi K. Goldberg & Rebecca Hellerstein, 2007. "Sticky prices: why firms hesitate to adjust the price of their goods," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 13(Nov).
  • Handle: RePEc:fip:fednci:y:2007:i:nov:n:v.13no.10
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    Citations

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    Cited by:

    1. Avichai Snir & Daniel Levy & Alex Gotler & Haipeng (Allan) Chen, 2012. "Not All Price Endings Are Created Equal: Price Points and Asymmetric Price Rigidity," Working Paper series 69_12, Rimini Centre for Economic Analysis.
    2. Andrew T. Young & Daniel Levy, 2014. "Explicit Evidence of an Implicit Contract," Journal of Law, Economics, and Organization, Oxford University Press, vol. 30(4), pages 804-832.
    3. Hellerstein, Rebecca, 2008. "Who bears the cost of a change in the exchange rate? Pass-through accounting for the case of beer," Journal of International Economics, Elsevier, vol. 76(1), pages 14-32, September.
    4. Pinelopi Koujianou Goldberg & Rebecca Hellerstein, 2013. "A Structural Approach to Identifying the Sources of Local Currency Price Stability," Review of Economic Studies, Oxford University Press, vol. 80(1), pages 175-210.
    5. Andrew T. Young & Daniel Levy, 2014. "Explicit Evidence of an Implicit Contract," Journal of Law, Economics, and Organization, Oxford University Press, vol. 30(4), pages 804-832.

    More about this item

    Keywords

    Prices ; Supply and demand ; Beer industry;

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