Strategic Complementarity and Asymmetric Price Setting Among Firms

13 Pages Posted: 17 Apr 2020

Date Written: March 25, 2020

Abstract

Using a large panel of firm survey data from Japan (Tankan survey), we provide micro evidence of strategic complementarity in firms’ price setting. We find that a firm’s price adjustment is affected by its competitors’ pricing behaviour and that this adjustment is larger when the firm is lowering its price, which accords with the theoretical predictions of quasi-kinked demand. Our results also indicate that firms with greater pricing power tend to be less sensitive to their competitors’ behaviour. Finally, we observe that heightened demand uncertainty mitigates the effect of shifts in demand conditions on the likelihood of price adjustment.

Full Publication: Inflation Dynamics in Asia and the Pacific

Keywords: demand uncertainty, firm survey data, price setting, strategic complementarity

JEL Classification: D22, D84, E31, E32

Suggested Citation

Koga, Maiko and Yoshino, Koichi and Sakata, Tomoya, Strategic Complementarity and Asymmetric Price Setting Among Firms (March 25, 2020). BIS Paper No. 111i. Available at SSRN: https://ssrn.com/abstract=3576049

Maiko Koga (Contact Author)

Bank of Japan ( email )

CPO Box 203
Tokyo, 100-91
Japan

Koichi Yoshino

Bank of Japan ( email )

CPO Box 203
Tokyo, 100-91
Japan

Tomoya Sakata

Bank of Japan ( email )

CPO Box 203
Tokyo, 100-91
Japan

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
3
Abstract Views
40
PlumX Metrics