Asymmetric Price Adjustment in the Small

Posted: 12 Oct 2008

See all articles by Haipeng (Allan) Chen

Haipeng (Allan) Chen

University of Kentucky - Gatton College of Business and Economics

Daniel Levy

Bar-Ilan University - Department of Economics; Emory University - Department of Economics; Rimini Center for Economic Analysis

Sourav Ray

McMaster University - DeGroote School of Business

Mark E. Bergen

University of Minnesota - Carlson School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: May 1, 2008

Abstract

Analyses of a large retail scanner price data set reveal a new and surprising regularity - small price increases occur more frequently than small price decreases for price changes of up to 10 cents. That is, we find asymmetric price adjustment "in the small." Furthermore, it turns out that inflation offers only a partial explanation for the finding. Indeed, substantial proportion of the asymmetry remains unexplained, even after accounting for the inflation. For example, the asymmetry holds also after excluding periods of inflation from the data, and even for products whose price had not increased. The findings hold for different aggregate and disaggregate measures of inflation and also after allowing for lagged price adjustments.

Keywords: Asymmetric price adjustment, Price rigidity, Inflation, Rational inattention, Consumer inattention, Monetary policy

JEL Classification: E31, D11, D21, D80, L11, L16, M31

Suggested Citation

Chen, Haipeng (Allan) and Levy, Daniel and Ray, Sourav and Bergen, Mark E., Asymmetric Price Adjustment in the Small (May 1, 2008). Journal of Monetary Economics, Vol. 55, No. 4, 2008, Emory Law and Economics Research Paper No. 08-36, Available at SSRN: https://ssrn.com/abstract=1282642

Haipeng (Allan) Chen

University of Kentucky - Gatton College of Business and Economics ( email )

550 South Limestone
Lexington, KY 40506
United States

Daniel Levy (Contact Author)

Bar-Ilan University - Department of Economics ( email )

Ramat-Gan, 5290002
Israel
+972 3 531-8345 (Phone)
+972 3 738-4034 (Fax)

HOME PAGE: http://econ.biu.ac.il/en/levy

Emory University - Department of Economics ( email )

1602 Fishburne Drive, Suite 306
Rich Building
Atlanta, GA 30322-0001
United States

HOME PAGE: http://economics.emory.edu/home/people/faculty/Levydaniel.html

Rimini Center for Economic Analysis ( email )

Wilfrid Laurier University
75 University Ave W.
Waterloo, Ontario N2L3C5
Canada

HOME PAGE: http://rcea.org/

Sourav Ray

McMaster University - DeGroote School of Business ( email )

1280 Main Street West
Hamilton, Ontario L8S 4M4
Canada
905-525-9140 x 22370 (Phone)
905-521-8995 (Fax)

Mark E. Bergen

University of Minnesota - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States
612-624-1821 (Phone)

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
703
PlumX Metrics