Non-Price Rigidity and Cost of Adjustment

32 Pages Posted: 23 Jan 2007

See all articles by Georg Muller

Georg Muller

Strategic Pricing Group

Mark E. Bergen

University of Minnesota - Carlson School of Management

Shantanu Dutta

University of Southern California - Marshall School of Business

Daniel Levy

Bar-Ilan University - Department of Economics; Emory University - Department of Economics; Rimini Center for Economic Analysis

Date Written: September 2006

Abstract

There has been increasing interest in understanding how firms undertake non-price adjustment activities, especially in situations where prices may be rigid despite changes in market conditions. Using scanner price data for over 4,500 different food products from a large US supermarket chain, we document periods of rigidity in product additions and deletions: new products are less likely to be introduced, and existing products are less likely to be discontinued during holiday periods than throughout the rest of the year. We argue that this is due to higher costs of undertaking these kinds of product assortment activities during holiday periods. We discuss how this relates to the exiting literature on non-price adjustment and price rigidity.

Keywords: Non-Price Adjustment Mechanism, Cost of Adjustment, Price Rigidity, Holiday, Product Assortment, Product Introduction, Product Deletion, Sticky Price, Rigid Price, Menu Cost

JEL Classification: D21, E12, E31, L20, M21, M31, L81

Suggested Citation

Muller, Georg and Bergen, Mark E. and Dutta, Shantanu and Levy, Daniel, Non-Price Rigidity and Cost of Adjustment (September 2006). Emory Law and Economics Research Paper No. 07-1. Available at SSRN: https://ssrn.com/abstract=958822 or http://dx.doi.org/10.2139/ssrn.958822

Georg Muller

Strategic Pricing Group ( email )

18W140 Butterfield Rd.
Oakbrook Terrace, IL 60181
United States

Mark E. Bergen

University of Minnesota - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States
612-624-1821 (Phone)

Shantanu Dutta

University of Southern California - Marshall School of Business ( email )

Hoffman Hall 701
Los Angeles, CA 90089-1427
United States
213-740-5038 (Phone)
213-740-7828 (Fax)

Daniel Levy (Contact Author)

Bar-Ilan University - Department of Economics ( email )

Ramat-Gan, 5290002
Israel
+972 3 531-8345 (Phone)
+972 3 738-4034 (Fax)

HOME PAGE: http://econ.biu.ac.il/en/levy

Emory University - Department of Economics ( email )

1602 Fishburne Drive, Suite 306
Rich Building
Atlanta, GA 30322-0001
United States

HOME PAGE: http://economics.emory.edu/home/people/faculty/Levydaniel.html

Rimini Center for Economic Analysis ( email )

Wilfrid Laurier University
75 University Ave W.
Waterloo, Ontario N2L3C5
Canada

HOME PAGE: http://rcea.org/

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
72
Abstract Views
1,037
rank
346,925
PlumX Metrics