Five Sources of Price Stickiness: An Empirical Investigation

Arvind Jaggi
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Arvind Jaggi: Franklin & Marshall College

Eastern Economic Journal, 1994, vol. 20, issue 2, 187-199

Abstract: This empirical study tests the relative merits of five competing product/factor market explanations of relative price stickiness in SIC industries. The five arguments are, (1) Okun: implicit contracts via customer-seller relations; (2) Hicks: inventory behavior of speculative traders; (3) Scitovsky: concentration in markets as manifest in price making; (4) Shupp: relative factor intensity with respect to variable inputs; and (5) Leontief: input-output structure as revealed by reliance on flexprice inputs. The arguments are presented in an optimizing framework, and then tested for their relative contribution to price inflexibility. There is significant support for product market arguments of Okun and Hicks, and factor market arguments of Shupp and Leontief.

Keywords: Concentration; Prices (search for similar items in EconPapers)
JEL-codes: E31 L11 (search for similar items in EconPapers)
Date: 1994
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Persistent link: https://EconPapers.repec.org/RePEc:eej:eeconj:v:20:y:1994:i:2:p:187-199

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