Price Changes - Stickiness and Internal Coordination in Multiproduct Firms

Wilko Letterie and Øivind Nilsen

No 5701, CESifo Working Paper Series from CESifo

Abstract: We assess empirically the micro-foundations of producers’ sticky pricing behaviour. The intertemporal profit function considered accounts for various functional forms of menu costs. The focus is on the analysis of multiproduct plants, and the menu costs therefore also allow for economies of scope. The structural model developed is tested on a merged panel of monthly product- and plant-specific producer prices and yearly plant-specific producer statistics for Norwegian plants. We find evidence of linear and fixed menu costs that account for inaction of price adjustment. Convex menu costs are statistically significant but of moderate importance. Finally, our estimates suggest economies of scope in adjusting prices resulting in (incomplete) synchronization of price changes.

Keywords: price setting; micro data; multiproduct firms (search for similar items in EconPapers)
JEL-codes: E30 E31 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (1)

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Working Paper: Price Changes - Stickiness and Internal Coordination in Multiproduct Firms (2016)
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