How Do Firms Set Prices? Narrative Evidence From Corporate Filings

37 Pages Posted: 2 Jun 2016 Last revised: 4 Feb 2018

Date Written: December 29, 2017

Abstract

We quantify narrative evidence from archived corporate filings to construct a novel dataset on the price-setting behavior of public companies. Our approach is closely related to that of survey-based studies on price setting, but we collect data from two decades instead one specific point in time. This allows us to investigate variation over time, and to establish that qualitative information provided directly by firms is informative about the aggregate variables macroeconomists are fundamentally interested in. Our findings suggest that (i) price-setting is asymmetric and has a strong state-dependent component, (ii) real rigidities in the form of strategic pricing complementarities are very common, and (iii) an increase in the number of price changes does not necessarily reflect a decrease in price rigidity. We discuss to what extent our results can be explained by strategic reporting behavior and consider their implications in the context of widely-used price-setting models.

Keywords: price-setting, narrative evidence, price stickiness, real rigidities, incomplete pass-through

JEL Classification: E31

Suggested Citation

Pitschner, Stefan, How Do Firms Set Prices? Narrative Evidence From Corporate Filings (December 29, 2017). Available at SSRN: https://ssrn.com/abstract=2787466 or http://dx.doi.org/10.2139/ssrn.2787466

Stefan Pitschner (Contact Author)

Uppsala University ( email )

Box 513
Uppsala, 751 20
Sweden

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