Multiproduct Firms and Price-Setting: Theory and Evidence from U.S. Producer Prices

Saroj Bhattarai and Raphael Schoenle

No 1245, Working Papers from Princeton University, Department of Economics, Center for Economic Policy Studies.

Abstract: In this paper, we establish three new facts about price-setting by multi-product firms and contribute a model that can match our findings. On the empirical side, using micro-data on U.S. producer prices, we first show that firms selling more goods adjust their prices more frequently but on average by smaller amounts. Moreover, the higher the number of goods, the lower is the fraction of positive price changes and the more dispersed the distribution of price changes. Second, we document substantial synchro- nization of price changes within firms across products and show that synchronization plays a dominant role in explaining pricing dynamics. Third, we find that within-firm synchronization of price changes increases as the number of goods increases. On the theoretical side, we present a state-dependent pricing model where multi-product firms face both aggregate and idiosyncratic shocks. When we allow for firm-specific menu costs and trend in ation, the model matches the empiricalfindings.

Keywords: Multi-product firms; Number of Goods; State-dependent pricing; U.S. Producer prices, United States (search for similar items in EconPapers)
JEL-codes: E30 E31 L11 (search for similar items in EconPapers)
Date: 2010-07
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
https://gceps.princeton.edu/wp-content/uploads/2017/01/211schoenle.pdf

Related works:
Journal Article: Multiproduct firms and price-setting: Theory and evidence from U.S. producer prices (2014)
Working Paper: Multiproduct firms and price-setting: theory and evidence from U.S. producer prices (2011)
Working Paper: Multiproduct Firms and Price-Setting: Theory and Evidence from U.S. Producer Prices (2011)
Working Paper: Multiproduct Firms and Price-Setting: Theory and Evidence from U.S. Producer Prices (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pri:cepsud:211

Access Statistics for this paper

More papers in Working Papers from Princeton University, Department of Economics, Center for Economic Policy Studies. Contact information at EDIRC.
Bibliographic data for series maintained by Bobray Bordelon ().