Everyday Regular Prices

29 Pages Posted: 10 Jan 2020

See all articles by Nicoletta Berardi

Nicoletta Berardi

Banque de France - Economic Study and Research Division

Federico Ravenna

HEC Montreal

Mario Samano

HEC Montreal

Date Written: January 2020

Abstract

Using a novel dataset from a large supermarket retailer in a European country that never engages in temporary sales, we establish that prices are actually as sticky as regular prices. Circumventing the debate on whether sales have to be included or excluded from price adjustments, we find evidence consistent with state-dependent price setting in a multiproduct firm. In particular, our data exhibit responsiveness of prices to changes to aggregate demand shifts, a more than trivial share of very small price changes, synchronization of price changes across items especially within the same product category. Price rigidity and the extent of state-dependence is heterogeneous across items. In particular, we find that pricing of top sales items (and even more of private label ones) is more flexible and state-dependent, which is consistent with price setting in a multiproduct firm characterized by rational inattention.

Keywords: Price Setting, Multiproduct Firm, State-Dependence, Synchronization, Rational Inattention, Sales Price, Regular Price

JEL Classification: E31, D22, E4, E32

Suggested Citation

Berardi, Nicoletta and Ravenna, Federico and Samano, Mario, Everyday Regular Prices (January 2020). Banque de France Working Paper No. 746, 2020, Available at SSRN: https://ssrn.com/abstract=3517176 or http://dx.doi.org/10.2139/ssrn.3517176

Nicoletta Berardi (Contact Author)

Banque de France - Economic Study and Research Division ( email )

31, rue Croix des Petits Champs
75049 Paris Cedex 01
FRANCE

Federico Ravenna

HEC Montreal ( email )

3000 Cote St Catherine
montreal, Quebec
Canada

Mario Samano

HEC Montreal ( email )

3000, Chemin de la Côte-Sainte-Catherine
Montreal, Quebec H2X 2L3
Canada

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
46
Abstract Views
416
PlumX Metrics