Price Setting Behaviour in the Netherlands: Results of a Survey

31 Pages Posted: 24 Apr 2006

See all articles by Marco Hoeberichts

Marco Hoeberichts

De Nederlandsche Bank - Research Department

Ad C.J. Stokman

De Nederlandsche Bank - Research Department

Date Written: April 2006

Abstract

This paper presents the results of a survey among Dutch firms on price setting behaviour in the Netherlands. It aims to identify how sticky prices are, which prices are sticky and why they are sticky. It is part of the Eurosystem Inflation Persistence Network (IPN). The most distinctive feature of the Dutch survey is its broad coverage of the business community (seven sectors and seven size classes). Our primary finding is that price setting behaviour depends critically on both a firm's size and the competitive environment it faces. Small firms in particular adopt more rigid pricing policies, and the weaker the competition a firm faces, the stickier a company's price will be. Furthermore, we find that wholesale and retail prices are more flexible than those for business-to-business services. The survey suggests that explicit and informal contracting are the most important sources of price stickiness. Menu costs and psychological pricing - two prominent explanations of price stickiness in the literature - are of minor importance. Finally, there is clear evidence of asymmetries in shocks driving price increases and decreases.

Keywords: price setting, nominal rigidity, survey data

JEL Classification: E30, D40

Suggested Citation

Hoeberichts, Marco M. and Stokman, Ad C.J., Price Setting Behaviour in the Netherlands: Results of a Survey (April 2006). ECB Working Paper No. 607. Available at SSRN: https://ssrn.com/abstract=890992

Marco M. Hoeberichts (Contact Author)

De Nederlandsche Bank - Research Department ( email )

P.O. Box 98
1000 AB Amsterdam
Netherlands
+31-20-524 2890 (Phone)
+31-20-524 2529 (Fax)

Ad C.J. Stokman

De Nederlandsche Bank - Research Department ( email )

P.O. Box 98
1000 AB Amsterdam
Netherlands

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