Average-cost pricing: Some evidence and implications

Carlo Altomonte (), Alessandro Barattieri and Susanto Basu

European Economic Review, 2015, vol. 79, issue C, 281-296

Abstract: We present new survey evidence on pricing behavior for more than 14,000 European firms, and study its macroeconomic implications. Among firms that are price setters, roughly 75% respond that their prices are set as a markup on total costs, a business practice termed “full cost pricing”. Only 25% set prices as markups over variable or marginal costs. Moreover, using industry data for the U.S., we find that the correlation between changes in output prices and changes in variable input prices is significantly lower when fixed costs are likely to be more important.

Keywords: Marginalist controversy; Full cost pricing; Amplification mechanisms (search for similar items in EconPapers)
JEL-codes: B22 E32 L11 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:79:y:2015:i:c:p:281-296

DOI: 10.1016/j.euroecorev.2015.08.003

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