Everyday Regular Prices in a Multi-Product Retailer

Nicoletta Berardi, Federico Ravenna and Mario Samano

No 19921, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Using a novel dataset from a large grocery retailer in a European country that never engages in temporary sale promotions, we establish that prices behave very similarly to regular prices set by retailers engaging in temporary promotional sales. We find evidence of state-dependent price setting in a multi-product firm when estimating the responsiveness of prices to exogenous demand shifts. The 'everyday regular prices' dataset is characterized by a more than trivial share of small price changes, and low synchronization of price changes across items. Price rigidity, selection and the extent of state-dependence are heterogeneous across items. Pricing of top sales items is more flexible and state-dependent compared to items that represent a small share of total revenues, a result consistent with price setting in a multi-product firm characterized by rational inattention. This result implies that inferences about firm-level price setting mechanisms from price microdata may be inaccurate if heterogeneity in price setting within the same firm is not taken into account.

Keywords: Price-setting; Multi-product firms; State-dependence; Synchronization; Rational inattention (search for similar items in EconPapers)
JEL-codes: D22 E31 E32 E4 (search for similar items in EconPapers)
Date: 2025-02
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