New Survey Evidence on the Pricing Behaviour of Luxembourg Firms
45 Pages Posted: 5 May 2006
Date Written: May 2006
Abstract
This paper analyses the pricing behaviour of Luxembourg firms based on survey evidence. Luxembourg firms typically have low market share, many competitors and longstanding customer relationships. Price discrimination is frequently applied. A majority of firms use price review rules that include elements of state dependency. The median firm reviews and changes prices twice a year. The results suggest an almost equal share of firms applying forward-looking, backward-looking and rules of thumb behaviour. The adjustment speed is faster when cost goes up and demand goes down than in the opposite cases. The most relevant theories explaining price rigidity are implicit contracts, cost-based pricing and explicit contracts. Increases in labour and other costs are the most important factors leading to price increases; for price reductions it is price reductions by competitors followed by declining labour costs.
Keywords: Survey data, price setting, price rigidity, adjustment speed
JEL Classification: C21, C22, C14
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Inflation Dynamics: A Structural Econometric Analysis
By Jordi Galí and Mark Gertler
-
Some Evidence on the Importance of Sticky Prices
By Mark Bils and Peter J. Klenow
-
Sticky Information Versus Sticky Prices: A Proposal to Replace the New Keynesian Phillips Curve
By N. Gregory Mankiw and Ricardo Reis
-
Sticky Information Versus Sticky Prices: A Proposal to Replace the New Keynesian Phillips Curve
By N. Gregory Mankiw and Ricardo Reis
-
By Varadarajan V. Chari, Patrick J. Kehoe, ...
-
Real Rigidities and the Non-Neutrality of Money
By Laurence Ball and David H. Romer
-
By Jordi Galí, Mark Gertler, ...
-
Control of the Public Debt: A Requirement for Price Stability?