State-dependent or time-dependent pricing? New evidence from a monthly firm-level survey: 1980–2017

Huw Dixon and Christian Grimme

European Economic Review, 2022, vol. 150, issue C

Abstract: We examine the relative importance of time and state dependence in the price-setting decisions of firms using a monthly panel of German firms over the period 1980–2017. We propose a refined version of time dependence by introducing different hazard functions for price increases and decreases. We find three sets of results. First, time dependence is much more important for price setting than what the previous literature has found. Second, price decreases can be well explained by time dependence alone. Price increases are best predicted by the interaction of time-dependent and firm-specific state factors. Third, time dependence for price increases and decreases look completely different from each other. Our empirical results support the notion that theoretical models should integrate both time and state dependence.

Keywords: Survey data; Price setting; Extensive margin; State-dependent pricing; Time-dependent pricing (search for similar items in EconPapers)
JEL-codes: E30 E31 E32 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Working Paper: State-Dependent or Time-Dependent Pricing? New Evidence from a Monthly Firm-Level Survey: 1980 2017 (2021)
Working Paper: State-Dependent or Time-Dependent Pricing? New Evidence from a Monthly Firm-Level Survey: 1980-2017 (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:150:y:2022:i:c:s0014292122001994

DOI: 10.1016/j.euroecorev.2022.104319

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