Menu Costs, Posted Prices, and Multiproduct Retailers

Shantanu Dutta, Mark Bergen, Daniel Levy () and Robert Venable
Additional contact information
Shantanu Dutta: University of Southern California
Mark Bergen: University of Minnesota
Robert Venable: Robert W. Baird, Co.

Macroeconomics from EconWPA

Abstract: We use a unique store-level data set to directly measure menu costs and to study the price change process at a large U.S. drugstore chain. We compare and contrast the magnitude of these measures with similar measures from 4 large U.S. supermarket chains. We find that (1) the actual magnitude of menu costs as a share of revenues, (2) menu costs per price change, (3) the frequent use of promotional pricing, and (4) the use of weekly pricing rules, are similar across both retail formats. Given that the main common features of these two types of retail formats are that (i) they both use posted prices, and (ii) both are multiproduct retailers selling a large number of products, our findings suggest that the magnitude of the menu cost components we measure, and the price change practices we document, may be generalizable across retail formats with these two features.

Keywords: Menu Cost; Posted Prices; Multiproduct Retailer; Price Rigidity; Sticky Prices; Cost of Price Adjustment; Time Dependent Pricing (search for similar items in EconPapers)
JEL-codes: E31 E12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com and nep-mac
Date: 2005-05-12
Note: Type of Document - pdf; pages: 32

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http://129.3.20.41/eps/mac/papers/0505/0505007.pdf (application/pdf)

Related works:
Journal Article: Menu Costs, Posted Prices, and Multiproduct Retailers (1999)
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