Abstract

https://ssrn.com/abstract=2893754
 


 



Costs of Managerial Attention and Activity as a Source of Sticky Prices: Structural Estimates from an Online Market


Sara Fisher Ellison


Massachusetts Institute of Technology (MIT) - Department of Economics

Christopher M. Snyder


Dartmouth College - Department of Economics

Hongkai Zhang


Massachusetts Institute of Technology (MIT) - Department of Economics

October 31, 2016

MIT Department of Economics Working Paper No. 17-01

Abstract:     
We study price dynamics for computer components sold on a price-comparison website. Our fine-grained data — a year of hourly price data for scores of rival retailers — allow us to estimate a dynamic model of competition, backing out structural estimates of managerial frictions. The estimated frictions are substantial, concentrated in the act of monitoring market conditions rather than entering a new price. We use our model to simulate the counterfactual gains from automated price setting and other managerial changes. Coupled with supporting reduced-form statistical evidence, our analysis provides a window into the process of managerial price setting and the microfoundation of pricing inertia, issues of growing interest in industrial organization and macroeconomics.

Number of Pages in PDF File: 54

Keywords: sticky prices; managerial costs; dynamic structural estimation; ecommerce

JEL Classification: L11, C73, D21, L81


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Date posted: January 5, 2017  

Suggested Citation

Ellison, Sara Fisher and Snyder, Christopher M. and Zhang, Hongkai, Costs of Managerial Attention and Activity as a Source of Sticky Prices: Structural Estimates from an Online Market (October 31, 2016). MIT Department of Economics Working Paper No. 17-01. Available at SSRN: https://ssrn.com/abstract=2893754 or http://dx.doi.org/10.2139/ssrn.2893754

Contact Information

Sara Fisher Ellison (Contact Author)
Massachusetts Institute of Technology (MIT) - Department of Economics ( email )
50 Memorial Drive
Room E52-262C
Cambridge, MA 02142
United States
617-253-3821 (Phone)
617-253-1330 (Fax)
Christopher M. Snyder
Dartmouth College - Department of Economics ( email )
301 Rockefeller Hall
Hanover, NH 03755
United States
(603) 646-0642 (Phone)
(603) 646-2122 (Fax)
HOME PAGE: http://www.dartmouth.edu/~csnyder/
Hongkai Zhang
Massachusetts Institute of Technology (MIT) - Department of Economics ( email )
50 Memorial Drive
E52-391
Cambridge, MA 02142
United States
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