Lumpy Price Adjustments: A Microeconometric Analysis

Emmanuel Dhyne, Catherine Fuss, Mohammad Pesaran and Patrick Sevestre

No 2793, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper presents a simple model of state-dependent pricing that allows identification of the relative importance of the degree of price rigidity that is inherent to the price setting mechanism (intrinsic) and that which is due to the price’s driving variables (extrinsic). Using two data sets consisting of a large fraction of the price quotes used to compute the Belgian and French CPI, we are able to assess the role of intrinsic and extrinsic price stickiness in explaining the occurrence and magnitude of price changes at the outlet level. We find that infrequent price changes are not necessarily associated with large adjustment costs. Indeed, extrinsic rigidity appears to be significant in many cases. We also find that asymmetry in the price adjustment could be due to trends in marginal costs and/or desired mark-ups rather than asymmetric cost of adjustment bands.

Keywords: micro non-linear panels; nominal intrinsic and extrinsic rigidities; sticky prices (search for similar items in EconPapers)
JEL-codes: C51 C81 D21 (search for similar items in EconPapers)
Pages: 60 pages
Date: 2007-05
New Economics Papers: this item is included in nep-cba and nep-mac
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Lumpy Price Adjustments: A Microeconometric Analysis (2011)
Journal Article: Lumpy Price Adjustments: A Microeconometric Analysis (2011)
Working Paper: Lumpy Price Adjustments: A Microeconometric Analysis (2007)
Working Paper: Lumpy Price Adjustments, A Microeconometric Analysis (2007)
Working Paper: Lumpy Price Adjustments: A Microeconometric Analysis (2007)
Working Paper: Lumpy price adjustments: a microeconometric analysis (2006)
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