Abstract

http://ssrn.com/abstract=338849
 
 

Citations (107)



 


 



The Rigidity of Prices


Dennis W. Carlton


University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

August 1987

NBER Working Paper No. w1813

Abstract:     
This paper presents evidence on the amount of price rigidity that exists in individual transaction prices. Using the Stigler-Kindahi data, I examine the behavior of individual buyers' prices for certain products used in manufacturing. My most important findings are: 1.The degree of price rigidity in many industries is significant. It is not unusual in some industries for prices to individual buyers to remain unchanged for several years. 2.Even for what appear to be homogeneous commodities, the correlation of price changes across buyers is very low. 3.There is no evidence that there is an asymmetry in price rigidity. In particular, prices are not rigid down-ward. 4.The fixed costs of changing price at least to some buyers seem trivial. There are plenty of instances where small price changes occur. 5.The level of industry concentration is strongly correlated with rigid prices. The more concentrated the industry, the longer is the average spell of price rigidity. 6.There appears to be a relationship between price rigidity, size of price change, and the length of time a buyer and seller deal with each other.I interpret the findings as evidence that it is erroneous to focus attention on price as the exclusive mechanism to allocate resources. Nonprice rationing is not a fiction, it is a reality of business and may be the efficient response to economic uncertainty.

Number of Pages in PDF File: 62

working papers series


Download This Paper

Date posted: July 16, 2004  

Suggested Citation

Carlton , Dennis W., The Rigidity of Prices (August 1987). NBER Working Paper No. w1813. Available at SSRN: http://ssrn.com/abstract=338849

Contact Information

Dennis W. Carlton (Contact Author)
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
312-322-0215 (Phone)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Feedback to SSRN


Paper statistics
Abstract Views: 609
Downloads: 33
Citations:  107

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo6 in 0.422 seconds