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Macroeconomic Implications of Uniform Pricing

Author

Listed:
  • Diego Daruich
  • Julian Kozlowski

Abstract

We compile a new database of grocery prices in Argentina, with over 9 million observations per day. We find uniform pricing both within and across regions—i.e., product prices almost do not vary within stores of a chain. Uniform pricing implies that prices would not change with regional conditions or shocks, particularly so if chains operate in several regions. We confirm this hypothesis using employment data. While prices in stores of chains operating almost exclusively in one region do react to changes in regional employment, stores of chains that operate in many regions do not. Finally, using a quantitative regional model with multi-region firms and uniform pricing, we find an almost one-half smaller elasticity of prices to a regional than an aggregate shock. This result highlights that some caution may be necessary when using regional shocks to estimate aggregate elasticities, particularly when the relevant prices are set uniformly across regions.

Suggested Citation

  • Diego Daruich & Julian Kozlowski, 2019. "Macroeconomic Implications of Uniform Pricing," Working Papers 2019-024, Federal Reserve Bank of St. Louis, revised 22 Jul 2020.
  • Handle: RePEc:fip:fedlwp:2019-024
    DOI: 10.20955/wp.2019.024
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    More about this item

    Keywords

    Price Dispersion; Regional Economics; Uniform Pricing;

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

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