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Staggering and Synchronization in Price-Setting: Evidence from Multipro-duct Firms

  • Saul Lach
  • Daniel Tsiddon

Most of the theoretical literature on price-setting behavior deals with the special case in which only a single price is changed. At the retail-store level, at least, where dozens of products are sold by a single price-setter, price-setting policies are not formulated for individual products. This feature of economic behavior raises a host of questions whose answers carry interesting implications. Are price setters staggered in the timing of price changes? Are price changes of different products synchronized within the store? If so, is this a result of aggregate shocks or of the presence of a store- specific component in the cost of adjusting prices? Can observed small changes in prices be rationalized by a menu cost model? We exploit the multiproduct dimension of the dataset on prices used in Lach and Tsiddon (1992a) to explore several of these and other issues. To the best of our knowledge this is the first empirical work on this subject.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4759.

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Date of creation: Jun 1994
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Publication status: published as American Economic Review, 1996, Vol.86, No.5, pp.1175-1196.
Handle: RePEc:nbr:nberwo:4759
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  1. Rob, Rafael, 1991. "Learning and Capacity Expansion under Demand Uncertainty," Review of Economic Studies, Wiley Blackwell, vol. 58(4), pages 655-75, July.
  2. Robert E. Lucas, Jr. & Michael Woodford, 1993. "Real Effects of Monetary Shocks in an Economy with Sequential Purchases," NBER Working Papers 4250, National Bureau of Economic Research, Inc.
  3. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
  4. Sheshinski, E. & Weiss, Y., 1990. "Staggered And Synchronized Price Policies Under Inflation: The Multiproduct Monopoly Case," Papers 35-90, Tel Aviv.
  5. Andrew C. Caplin & Daniel F. Spulber, 1987. "Menu Costs and the Neutrality of Money," NBER Working Papers 2311, National Bureau of Economic Research, Inc.
  6. Eden, Benjamin, 1994. "The Adjustment of Prices to Monetary Shocks When Trade Is Uncertain and Sequential," Journal of Political Economy, University of Chicago Press, vol. 102(3), pages 493-509, June.
  7. Lucas, Robert E, Jr, 1973. "Some International Evidence on Output-Inflation Tradeoffs," American Economic Review, American Economic Association, vol. 63(3), pages 326-34, June.
  8. Tsiddon, Daniel, 1993. "The (Mis)Behaviour of the Aggregate Price Level," Review of Economic Studies, Wiley Blackwell, vol. 60(4), pages 889-902, October.
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