Quantum Prices

45 Pages Posted: 13 Jan 2020 Last revised: 23 Jan 2020

See all articles by Roberto Rigobon

Roberto Rigobon

Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)

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Date Written: January 2020

Abstract

Online data was collected for 350,000 products from over 65 fashion retailers in the U.S. and the U.K. Many retailers practice an extreme form of stickiness described as quantum prices: a large number of differentiated products are priced using few sparse prices, with price changes occurring rarely and in large magnitudes. Quantum prices exist within categories (similar products) and across product introductions (over time). Most surprisingly, it also occurs across categories (very different products). Normalized measures indicate substantial price clustering beyond the role of popular prices, assortment size, or digit endings. Quantum prices imply frictions in lumpy price adjustments through product mix, inflation measurement, and in the law-of-one-price.

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Suggested Citation

Rigobon, Roberto, Quantum Prices (January 2020). NBER Working Paper No. w26646, Available at SSRN: https://ssrn.com/abstract=3518259

Roberto Rigobon

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

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National Bureau of Economic Research (NBER) ( email )

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