Small Price Changes, Sales Volume, and Menu Cost

Avichai Snir (), Daniel Levy and Doron Sayag
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Avichai Snir: Bar-Ilan University

No 2024-02, Working Papers from Bar-Ilan University, Department of Economics

Abstract: The finding of small price changes in many retail price datasets is often viewed as a puzzle. We show that a possible explanation for the presence of small price changes is related to sales volume, an observation that has been overlooked in the existing literature. Analyzing a large retail scanner price dataset that contains information on both prices and sales volume, we find that small price changes are more frequent when products’ sales volume is high. This finding holds across product categories, within product categories, and for individual products. It is also robust to various sensitivity analyses such as measurement errors, the definition of “small” price changes, the inclusion of measures of price synchronization, the size of producers, the time horizon used to compute the average sales volume, the revenues, the competition, shoppers’ characteristics, etc

Keywords: Menu cost; (S; s) band; price rigidity; sticky prices; small price changes; small price adjustments; sales volume (search for similar items in EconPapers)
JEL-codes: E31 E32 L16 L81 M31 (search for similar items in EconPapers)
Pages: 172 pages
Date: 2024-03
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Related works:
Working Paper: Small Price Changes, Sales Volume, and Menu Cost (2024)
Working Paper: Small Price Changes, Sales Volume, and Menu Cost (2024)
Working Paper: Small Price Changes, Sales Volume, and Menu Cost (2024)
Working Paper: Small Price Changes, Sales Volume, and Menu Cost (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:biu:wpaper:2024-02

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