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

Raphael Schoenle and Saroj Bhattarai

No 926, 2011 Meeting Papers from Society for Economic Dynamics

Abstract: In this paper, we establish three new facts about price-setting by multi-product firms and contribute a model that can explain our findings. Our findings have important implications for real effects of nominal shocks and provide guidance for how to model pricing decisions of firms. 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 synchronization 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 inflation, the model matches the empirical findings.

Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://red-files-public.s3.amazonaws.com/meetpapers/2011/paper_926.pdf (application/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 (2010)
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:red:sed011:926

Access Statistics for this paper

More papers in 2011 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().