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Sticky information and price controls: Evidence from a natural experiment

Author

Listed:
  • Doron Sayag

    (Department of Economics Bar-Ilan University)

  • Daniel Levy

    (Department of Economics Bar-Ilan University, Department of Economics Emory University,ICEA, ISET at TSU, and RCEA)

  • Avichai Snir

    (Department of Economics Bar-Ilan University)

Abstract

We test the predictions of the sticky information model using a survey dataset by comparing shoppers’ accuracy in recalling the prices of regulated and comparable unregulated products. Because regulated product prices are capped, they are sold more than comparable unregulated products, while their prices change less frequently and vary less across stores and between brands, than the prices of comparable unregulated products. Therefore, shoppers would be expected to recall the regulated product prices more accurately. However, we find that shoppers are better at recalling the prices of unregulated products, in line with the sticky information model which predicts that shoppers will be more attentive to prices that change more frequently.

Suggested Citation

  • Doron Sayag & Daniel Levy & Avichai Snir, 2025. "Sticky information and price controls: Evidence from a natural experiment," Working Papers 2025-02, Bar-Ilan University, Department of Economics.
    • Handle: RePEc:biu:wpaper:2025-02
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    More about this item

    Keywords

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    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • K20 - Law and Economics - - Regulation and Business Law - - - General
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General

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