Heterogeneity in Price Rigidity: Evidence from a Case Study Using Micro-Level Data

Daniel Levy (1, 2, 3) , Shantanu Dutta (4) , Mark Bergen (5)

1 RCEA - Rimini Center for Economic Analysis
2 Emory University [Atlanta, GA]
3 Bar-Ilan University [Israël]
4 FBE, Marshall School of Business
5 Carlson School of Management

We combine two data sets to study price rigidity. The first consists of weekly time series of retail, wholesale, and spot prices for twelve products. These time series contain two exogenous cost shocks. We find that prices exhibit more rigidity in response to the second shock than the first. The second data set consists of all publicly available information about the shocks. Content analysis of these information reveals that the first shock is larger and more persistent, and the market has more information on it than the second. We conclude, therefore, that prices are more flexible in response to cost shocks that are larger, that are more persistent, and on which market participants have more information.

Mots clés: Menu Cost; Cost of Price Adjustment; Price Rigidity; Sticky Prices; Rigid Prices; Price Flexibility; Variation in Price Rigidity; Price Stickiness; Exogenous Shocks; Temporary Shocks; Permanent Shocks; Weather Shocks; News; Information Shocks; Content Analysis; Shock Persistence

Domaines: Sciences de l'Homme et Société; Economies et finances

Daniel Levy, Shantanu Dutta, Mark Bergen. Heterogeneity in Price Rigidity: Evidence from a Case Study Using Micro-Level Data. Journal of Money, Credit, and Banking, 2002, 34 (1), pp.197-220. ⟨10.1353/mcb.2002.0031⟩. ⟨hal-02386496⟩