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Everyday Regular Prices in a Multi-Product Retailer

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Listed:
  • Nicoletta Berardi
  • Federico Ravenna
  • Mario Samano

Abstract

Using a novel dataset from a large grocery retailer in a European country that never engages in temporary sale promotions, we establish that prices behave very similarly to regular prices set by retailers engaging in temporary promotional sales. We find evidence of state-dependent price setting in a multi-product firm when es timating the responsiveness of prices to exogenous demand shifts. The ’everyday regular prices’ dataset is characterized by a more than trivial share of small price changes, and low synchronization of price changes across items. Price rigidity, se lection and the extent of state-dependence are heterogeneous across items. Pricing of top sales items is more flexible and state-dependent compared to items that rep resent a small share of total revenues, a result consistent with price setting in a multi-product firm characterized by rational inattention. This result implies that inferences about firm-level price setting mechanisms from price microdata may be inaccurate if heterogeneity in price setting within the same firm is not taken into account.

Suggested Citation

  • Nicoletta Berardi & Federico Ravenna & Mario Samano, 2024. "Everyday Regular Prices in a Multi-Product Retailer," Carlo Alberto Notebooks 733 JEL Classification: E, Collegio Carlo Alberto.
    • Handle: RePEc:cca:wpaper:733
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    References listed on IDEAS

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    1. Virgiliu Midrigan, 2011. "Menu Costs, Multiproduct Firms, and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 79(4), pages 1139-1180, July.
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    Keywords

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    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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