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Magazine prices revisited

  • Jonathan L. Willis

This paper examines price adjustment behavior in the magazine industry. In a frequently cited study, Cecchetti (1986) constructs a reduced-form (S,s) model for firms. Cecchetti assumes that a firm's pricing rules are fixed for non-overlapping three-year intervals and estimates the model using a conditional logit specification from Chamberlain (1980). The estimates are inconsistent, however, due to the state-dependent specification of the model. I illustrate the econometric problems in Cecchetti's results through a Monte Carlo exercise and then suggest a method for producing consistent estimates based upon Heckman and Singer (1984). The corrected results provide strong support for models of state-dependent pricing.

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Paper provided by Federal Reserve Bank of Kansas City in its series Research Working Paper with number RWP 01-15.

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Date of creation: 2001
Date of revision:
Handle: RePEc:fip:fedkrw:rwp01-15
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  1. Bo E. Honoré & Luojia Hu, 2004. "Estimation of Discrete Time Duration Models with Grouped Data," CAM Working Papers 2004-07, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
  2. repec:oup:restud:v:65:y:1998:i:1:p:87-107 is not listed on IDEAS
  3. Card, David & Sullivan, Daniel G, 1988. "Measuring the Effect of Subsidized Training Programs on Movements in and out of Employment," Econometrica, Econometric Society, vol. 56(3), pages 497-530, May.
  4. Ball, Laurence & Romer, David, 1990. "Real Rigidities and the Non-neutrality of Money," Review of Economic Studies, Wiley Blackwell, vol. 57(2), pages 183-203, April.
  5. repec:oup:restud:v:57:y:1990:i:2:p:183-203 is not listed on IDEAS
  6. repec:oup:restud:v:47:y:1980:i:1:p:225-38 is not listed on IDEAS
  7. repec:oup:restud:v:44:y:1977:i:2:p:287-303 is not listed on IDEAS
  8. Cecchetti, Stephen G., 1986. "The frequency of price adjustment : A study of the newsstand prices of magazines," Journal of Econometrics, Elsevier, vol. 31(3), pages 255-274, April.
  9. repec:oup:restud:v:66:y:1999:i:2:p:275-308 is not listed on IDEAS
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