Why Prices Rise Faster than they Fall
For decades the fact that input price hikes are passed on faster than input price cuts was thought to be well explained by the assumption that competitive firms fully pass on all input price changes, so they can't price asymmetrically, so asymmetric pricing behavior is limited to oligopolies, firms that do all sorts of bizarre things (finding yet another one being no big deal). However, Peltzman found no effect of concentration on such asymmetric pricing, raising the puzzle of why competitive industries generally price asymmetrically. This paper solves that puzzle.
|Date of creation:||Jul 2009|
|Date of revision:|
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- Jochen Meyer & Stephan Cramon-Taubadel, 2004.
"Asymmetric Price Transmission: A Survey,"
Journal of Agricultural Economics,
Wiley Blackwell, vol. 55(3), pages 581-611.
- Meyer, Jochen & von Cramon-Taubadel, Stephan, 2002. "Asymmetric Price Transmission: A Survey," 2002 International Congress, August 28-31, 2002, Zaragoza, Spain 24822, European Association of Agricultural Economists.
- William J. Baumol & Richard E. Quandt & Harold T. Shapiro, 1964. "Oligopoly Theory and Retail Food Pricing," The Journal of Business, University of Chicago Press, vol. 37, pages 346.
- Ronald W. Ward, 1982. "Asymmetry in Retail, Wholesale, and Shipping Point Pricing for Fresh Vegetables," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 64(2), pages 205-212.
- Sam Peltzman, 2000.
"Prices Rise Faster than They Fall,"
Journal of Political Economy,
University of Chicago Press, vol. 108(3), pages 466-502, June.
- Sam Peltzman, 1998. "Prices Rise Faster Than They Fall," University of Chicago - George G. Stigler Center for Study of Economy and State 142, Chicago - Center for Study of Economy and State.
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