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Menu Costs, Posted Prices, and Multiproduct Retailers

Author

Listed:
  • Shantanu Dutta

    (University of Southern California)

  • Mark Bergen

    (University of Minnesota)

  • Daniel Levy

    (Emory University)

  • Robert Venable

    (Robert W. Baird, Co.)

Abstract

We use a unique store-level data set to directly measure menu costs and to study the price change process at a large U.S. drugstore chain. We compare and contrast the magnitude of these measures with similar measures from 4 large U.S. supermarket chains. We find that (1) the actual magnitude of menu costs as a share of revenues, (2) menu costs per price change, (3) the frequent use of promotional pricing, and (4) the use of weekly pricing rules, are similar across both retail formats. Given that the main common features of these two types of retail formats are that (i) they both use posted prices, and (ii) both are multiproduct retailers selling a large number of products, our findings suggest that the magnitude of the menu cost components we measure, and the price change practices we document, may be generalizable across retail formats with these two features.

Suggested Citation

  • Shantanu Dutta & Mark Bergen & Daniel Levy & Robert Venable, 2005. "Menu Costs, Posted Prices, and Multiproduct Retailers," Macroeconomics 0505007, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpma:0505007
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Menu Cost; Posted Prices; Multiproduct Retailer; Price Rigidity; Sticky Prices; Cost of Price Adjustment; Time Dependent Pricing;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory

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