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Rockets and Feathers: Understanding Asymmetric Pricing

Mariano E. Tappata
University of British Columbia - Sauder School of Business, Strategy and Business Economics Division

RAND Journal of Economics, Vol. 40, No. 4, 2009

Abstract:
Prices rise like rockets but fall like feathers. This stylized fact of most markets is confirmed by many empirical studies. In this paper, I develop a model with competitive firms and rational partially informed consumers where the asymmetric response to costs by firms emerges naturally. In contrast to public opinion and past work, collusion is not necessary to explain such a result.

Keywords: Asymmetric Pricing, Rockets and Feathers, Consumer Search, Cost Pass-through

JEL Classifications: D21, D40, L13

Accepted Paper Series

Date posted: April 09, 2007 ; Last revised: October 16, 2009

Suggested Citation

Tappata, Mariano E., Rockets and Feathers: Understanding Asymmetric Pricing (May 1, 2008). RAND Journal of Economics, Vol. 40, No. 4, 2009. Available at SSRN: http://ssrn.com/abstract=978022

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Contact Information

Mariano E. Tappata (Contact Author)

University of British Columbia - Sauder School of Business, Strategy and Business Economics Division ( email )

2053 Main Mall
Vancouver B.C., BC V6T-1Z2
Canada
1 (604) 822 8355 (Phone)