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Small price changes and menu costs

✍ Scribed by Saul Lach; Daniel Tsiddon

Publisher
John Wiley and Sons
Year
2007
Tongue
English
Weight
229 KB
Volume
28
Category
Article
ISSN
0143-6570

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✦ Synopsis

Abstract

We find that while some individual price changes are indeed β€˜small’, the average price change of different products within a store in any given month is not. Moreover, the smaller the price change of an individual product, the larger the average price change of the remaining products sold by the store. We argue that these findings are consistent with extensions of menu cost models of price‐setting behavior to multiproduct firms when these firms have high average costs and low marginal costs of changing prices. Copyright Β© 2007 John Wiley & Sons, Ltd.

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