The Magnitude of Menu Costs: Direct Evidence from Large U.S. Supermarket Chains

Daniel Levy, Mark Bergen, Shantanu Dutta and Robert Venable

EconStor Open Access Articles and Book Chapters, 1997, vol. 112, issue 3, 791–824

Abstract: We use store-level data to document the exact process of changing prices and to directly measure menu costs at five multistore supermarket chains. We show that changing prices in these establishments is a complex process, requiring dozens of steps and a nontrivial amount of resources. The menu costs average $105,887/year per store, comprising 0.70 percent of revenues, 35.2 percent of net margins, and $0.52/price change. These menu costs may be forming a barrier to price changes. Specifically, (1) a supermarket chain facing higher menu costs (due to item pricing laws that require a separate price tag on each item) changes prices two and one-half times less frequently than the other four chains; (2) within this chain the prices of products exempt from the law are changed over three times more frequently than the products subject to the law.

Keywords: Menu Cost; Posted Prices; Multiproduct Retailer; Price Rigidity; Sticky Prices; Rigid Prices; Cost of Price Adjustment; New Keynesian Economics; Time Dependent Pricing (search for similar items in EconPapers)
JEL-codes: E12 E31 (search for similar items in EconPapers)
Date: 1997
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Citations: View citations in EconPapers (287)

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Related works:
Working Paper: The Magnitude of Menu Costs: Direct Evidence from Large U.S. Supermarket Chains (2005)
Journal Article: The Magnitude of Menu Costs: Direct Evidence from Large U. S. Supermarket Chains (1997)
Working Paper: The Magnitude of Menu Costs: Direct Evidence from Large U. S. Supermarket Chains (1997)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:espost:206762

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