Pricing decisions under financial frictions: evidence from the wdn survey

José Manuel Montero ()
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José Manuel Montero: Banco de España and Universidad Complutense de Madrid

No 1724, Working Papers from Banco de España

Abstract: I test the predictions from Duca, Montero, Riggi and Zizza (2017), who develop a customermarket model with consumer switching costs and capital-market imperfections in which price-cost markups behave countercyclically, with a subsample of European firms participating in the Wage Dynamics Network 2014 survey. I use a novel empirical approach developed by Aakvik, Heckman and Vytlacil (2005) for estimating discrete choice models with binary endogenous regressors that allows for selection on unobservables. Results show that firms subject to financial constraints had a significantly higher probability of raising markups than in a counterfactual scenario without such constraints. Moreover, the estimated partial effects for the main variables are in overall accordance with the predictions from the theoretical model.

Keywords: markups; financial frictions; customer market; discrete-choice models (search for similar items in EconPapers)
JEL-codes: C25 C26 D22 L11 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2017-07
New Economics Papers: this item is included in nep-dcm and nep-eur
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:1724

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