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

53 Pages Posted: 13 Jun 2018

See all articles by Sara Fisher Ellison

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

Multiple version iconThere are 2 versions of this paper

Date Written: June 2018

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.

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Suggested Citation

Fisher Ellison, Sara 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 (June 2018). NBER Working Paper No. w24680, Available at SSRN: https://ssrn.com/abstract=3194737

Sara Fisher Ellison (Contact Author)

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

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Christopher M. Snyder

Dartmouth College - Department of Economics ( email )

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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
8324214386 (Phone)

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