Asymmetric Price Adjustment in the Small

Daniel Levy (), Haipeng (Allan) Chen (), Sourav Ray and Mark Bergen

MPRA Paper from University Library of Munich, Germany

Abstract: Analyzing a large weekly retail transaction price dataset, we uncover a surprising regularity—small price increases occur more frequently than small price decreases for price changes of up to about 10 cents, while there is no such asymmetry for larger price changes. The asymmetry holds for the entire sample and for individual categories. We find that while inflation can explain some of the asymmetry, inflation is not the whole story as the asymmetry holds even after excluding inflationary periods from the data, and even for products whose price had not increased over the eight-year period. The findings hold for different measures of inflation and also after allowing for lagged price adjustments. We offer a consumer-based explanation for these findings.

Keywords: Asymmetric Price Adjustment; Price Rigidity; Rational Inattention; Rational Ignorance (search for similar items in EconPapers)
JEL-codes: D11 D21 D80 E31 L11 L16 M31 (search for similar items in EconPapers)
Date: 2006-11-30
New Economics Papers: this item is included in nep-mac and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Related works:
Journal Article: Asymmetric price adjustment in the small (2008)
Journal Article: Asymmetric Price Adjustment in the Small (2008)
Working Paper: Asymmetric price adjustment in the small (2008)
Working Paper: Asymmetric Price Adjustment in the Small (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:1097

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