Patterns of Retail and Wholesale Price Variations : Its Implication on Sticky Price Model

This paper presents patterns of retail and wholesale price changes in terms of its frequency and size. Sixty eight products in the eight categories across stores from 1989 to 1994 are examined using weekly scanner data of the supermarket in Chicago area. Several interesting patterns are found. First, compared to the figures cited in the previous studies, more frequent price changes are observed. In the case of retail prices, highly frequent promotional activities are observed. Second, the size distribution of price changes is quite dispersed with a mixture of small and big price changes. Third, the frequency and size of price changes have loose correspondence with the level of inflation. Fourth, asymmetry is found in the size distribution: there are more positive changes than negative changes especially in smaller magnitude. Fifth, much heterogeneity is found not only across categories, but also across products. These findings provide a better understanding of retailers' behavior and a basis of assessing the implication of previous theoretical and empirical works. Further, this paper asks for a development of economic modeling to incorporate retailers' various strategies.