Everyday Regular Prices in a Multi-Product Retailer

Nicoletta Berardi, Federico Ravenna and Mario Samano

Carlo Alberto Notebooks from Collegio Carlo Alberto

Abstract: Using a novel dataset from a large grocery retailer in a European country that never engages in temporary sale promotions, we establish that prices behave very similarly to regular prices set by retailers engaging in temporary promotional sales. We find evidence of state-dependent price setting in a multi-product firm when es timating the responsiveness of prices to exogenous demand shifts. The ’everyday regular prices’ dataset is characterized by a more than trivial share of small price changes, and low synchronization of price changes across items. Price rigidity, se lection and the extent of state-dependence are heterogeneous across items. Pricing of top sales items is more flexible and state-dependent compared to items that rep resent a small share of total revenues, a result consistent with price setting in a multi-product firm characterized by rational inattention. This result implies that inferences about firm-level price setting mechanisms from price microdata may be inaccurate if heterogeneity in price setting within the same firm is not taken into account.

Keywords: price setting; multi-product firm; state-dependence; synchronization; rational inattention; promotional price; regular price (search for similar items in EconPapers)
Pages: 27 pages
Date: 2024
New Economics Papers: this item is included in nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:cca:wpaper:733

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