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Staggered And Synchronized Price Policies Under Inflation: The Multiproduct Monopoly Case

Author

Listed:
  • SHESHINSKI, E.
  • WEISS, Y.

Abstract

This paper analyses the optimum pricing policies of a multiproduct monopoly in the presence of inflation and fixed costs of nominal price changes. We examine the conditions which lead to staggered or synchronized pricing policies when the timing of price changes is endogenous. Two aspects of the decision problem are emphasized: the interactions in the joint profit function between the prices of the various goods and the interactions in the costs of price adjustment. We show that with positive interactions in the profit function and costs of price adjustments that are independent across products, staggering is unlikely. Depending on initial conditions, a firm may follow a staggered steady state or a synchronized steady state path. But the former is locally unstable while the latter is attained from a broad set of initial conditions. For a small rate of interest the staggered policy is optimal if! the interaction in profits is negative.
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Suggested Citation

  • Sheshinski, E. & Weiss, Y., 1990. "Staggered And Synchronized Price Policies Under Inflation: The Multiproduct Monopoly Case," Papers 35-90, Tel Aviv.
  • Handle: RePEc:fth:teavfo:35-90
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    Cited by:

    1. Andrea Stella, 2014. "The Magnitude of Menu Costs: A Structural Estimation," 2014 Meeting Papers 436, Society for Economic Dynamics.
    2. Pasten, Ernesto & Schoenle, Raphael, 2016. "Rational inattention, multi-product firms and the neutrality of money," Journal of Monetary Economics, Elsevier, vol. 80(C), pages 1-16.
    3. Daniel Levy & Shantanu Dutta & Mark Bergen & Robert Venable, 1998. "Price adjustment at multiproduct retailers," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 19(2), pages 81-120.
    4. Emmanuel Dhyne & Jerzy Konieczny & Fabio Rumler & Patrick Sevestre, 2009. "Price rigidity in the euro area - An assessment," European Economy - Economic Papers 2008 - 2015 380, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    5. Erwan Gautier, 2009. "Les ajustements microéconomiques des prix : une synthèse des modèles théoriques et résultats empiriques," Revue d'économie politique, Dalloz, vol. 119(3), pages 323-372.
    6. Jens-Peter Loy & Christoph Weiss, 2002. "Staggering and synchronisation of prices in a low-inflation environment: Evidence from German food stores," Agribusiness, John Wiley & Sons, Ltd., vol. 18(4), pages 437-457.
    7. Mark J. Zbaracki & Mark Ritson & Daniel Levy & Shantanu Dutta & Mark Bergen, 2004. "Managerial and Customer Costs of Price Adjustment: Direct Evidence from Industrial Markets," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 514-533, May.
    8. Mark J. Zbaracki & Mark Bergen & Daniel Levy, 2006. "The Anatomy of a Price Cut: Discovering Organizational Sources of the Costs of Price Adjustment," Emory Economics 0610, Department of Economics, Emory University (Atlanta).
    9. Chen, Haipeng (Allan) & Levy, Daniel & Ray, Sourav & Bergen, Mark, 2008. "Asymmetric price adjustment in the small," Journal of Monetary Economics, Elsevier, vol. 55(4), pages 728-737, May.
    10. Bhattarai, Saroj & Schoenle, Raphael, 2014. "Multiproduct firms and price-setting: Theory and evidence from U.S. producer prices," Journal of Monetary Economics, Elsevier, vol. 66(C), pages 178-192.
    11. Mark Zbaracki & Mark Bergen & Shantanu Dutta & Daniel Levy & Mark Ritson, 2005. "Beyond the Cost of Price Adjustment: Investments in Pricing Capital," Macroeconomics 0505013, EconWPA.
    12. repec:pri:cepsud:211schoenle is not listed on IDEAS
    13. Mariano Tommasi, 1992. "Inflation and Relative Prices Evidence from Argentina," UCLA Economics Working Papers 661, UCLA Department of Economics.
    14. Lach, Saul & Tsiddon, Daniel, 1996. "Staggering and Synchronization in Price-Setting: Evidence from Multiproduct Firms," American Economic Review, American Economic Association, vol. 86(5), pages 1175-1196, December.
    15. Emmanuel Dhyne & Jerzy Konieczny, 2007. "Temporal Distribution of Price Changes: Staggering in the Large and Synchronization in the Small," Working Paper series 01_07, Rimini Centre for Economic Analysis.
    16. Wasim Shahid Malik & Ahsan ul Haq Satti & Ghulam Saghir, 2008. "Price Setting Behaviour of Pakistani Firms: Evidence from Four Industrial Cities of Punjab," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 47(3), pages 247-266.
    17. Fisher, Timothy C. G. & Konieczny, Jerzy D., 2000. "Synchronization of price changes by multiproduct firms: evidence from Canadian newspaper prices," Economics Letters, Elsevier, vol. 68(3), pages 271-277, September.
    18. Carlos Borondo, 1994. "La rigidez nominal de los precios de la Nueva Economía Keynesiana: una panorámica," Investigaciones Economicas, Fundación SEPI, vol. 18(2), pages 245-288, May.
    19. Rajesh Chakrabarti & Barry Scholnick, 2007. "The mechanics of price adjustment: new evidence on the (un)importance of menu costs," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(7), pages 657-668.
    20. Alexander L. Wolman, 2007. "The frequency and costs of individual price adjustment," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(6), pages 531-552.
    21. Virgiliu Midrigan, 2005. "Menu Costs, Multi-Product Firms and Aggregate Fluctuations," Macroeconomics 0511004, EconWPA.
    22. Loy, Jens-Peter & Weiss, Christoph R., 2004. "Synchronization due to common shocks? Evidence from German grocery prices," Economics Letters, Elsevier, vol. 85(1), pages 123-127, October.
    23. Saul Lach & Daniel Tsiddon, 2007. "Small price changes and menu costs," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(7), pages 649-656.
    24. Boyan Jovanovic & Dmitriy Stolyarov, 1997. "Learning, Complementarities, and Asynchronous Use of Technology," NBER Working Papers 5870, National Bureau of Economic Research, Inc.

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