IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper

Rigidity, Dispersion and Discreteness in Chain Prices

  • Benjamin Eden

    ()

    (Department of Economics, Vanderbilt University)

  • Matthew Jaremski

    ()

    (Department of Economics, Vanderbilt University)

This paper studies price setting within a chain of grocery stores, using a scanner database that contains observations of retail prices for 435 products within 75 stores over 121 weeks. We find price dispersion within the chain. Stores differentiate themselves by the prices of relatively few items. Typically most prices in the store are at the mode of the cross sectional price distribution, some are above the mode and some are below the mode. The probability of a price change is 3.6% when the price is at the mode and 76.2% when the price is not at the mode. We explain the apparent attraction to the mode in terms of a model in which price discreteness plays an important role but there is no inertia. We also find that the probability of a price change is higher when the deviation from the mean of the cross sectional price distribution is large. But unlike conventional wisdom, the probability of a price change is higher for young prices.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.accessecon.com/pubs/VUECON/vu09-w03R.pdf
File Function: Revised version, 2009
Download Restriction: no

Paper provided by Vanderbilt University Department of Economics in its series Vanderbilt University Department of Economics Working Papers with number 0903.

as
in new window

Length:
Date of creation: Mar 2009
Date of revision:
Handle: RePEc:van:wpaper:0903
Contact details of provider: Web page: http://www.vanderbilt.edu/econ/wparchive/index.html

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Victor Aguirregabiria, 1999. "The Dynamics of Markups and Inventories in Retailing Firms," Review of Economic Studies, Oxford University Press, vol. 66(2), pages 275-308.
  2. repec:nbr:nberre:0126 is not listed on IDEAS
  3. Peter J. Klenow & Oleksiy Kryvtsov, 2005. "State-Dependent or Time-Dependent Pricing: Does it Matter for Recent U.S. Inflation?," NBER Working Papers 11043, National Bureau of Economic Research, Inc.
  4. Varian, Hal R, 1980. "A Model of Sales," American Economic Review, American Economic Association, vol. 70(4), pages 651-59, September.
  5. Reinganum, Jennifer F, 1979. "A Simple Model of Equilibrium Price Dispersion," Journal of Political Economy, University of Chicago Press, vol. 87(4), pages 851-58, August.
  6. Dana, James D, Jr, 2001. "Monopoly Price Dispersion under Demand Uncertainty," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(3), pages 649-70, August.
  7. Saul Lach, 2002. "Existence And Persistence Of Price Dispersion: An Empirical Analysis," The Review of Economics and Statistics, MIT Press, vol. 84(3), pages 433-444, August.
  8. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
  9. Mark Bils & Peter J. Klenow, 2002. "Some Evidence on the Importance of Sticky Prices," NBER Working Papers 9069, National Bureau of Economic Research, Inc.
  10. N. Gregory Mankiw & Ricardo Reis, 2007. "Sticky Information in General Equilibrium," Journal of the European Economic Association, MIT Press, vol. 5(2-3), pages 603-613, 04-05.
  11. Robert J. Barro, 1972. "A Theory of Monopolistic Price Adjustment," Review of Economic Studies, Oxford University Press, vol. 39(1), pages 17-26.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:van:wpaper:0903. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (John P. Conley)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.