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

53 Pages Posted: 13 Jun 2018 Last revised: 9 Jun 2021

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; National Bureau of Economic Research

Hongkai Zhang

Massachusetts Institute of Technology (MIT) - Department of Economics

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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.

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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Hongkai Zhang

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

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