Price Flexibility in Channels of Distribution: Evidence from Scanner Data

Shantanu Dutta, Mark Bergen and Daniel Levy ()
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Shantanu Dutta: USC
Mark Bergen: Minnesota

Macroeconomics from University Library of Munich, Germany

Abstract: In this study, we empirically examine the extent of price rigidity using a unique store-level time series data set - consisting of (i) actual retail transaction prices, (ii) actual wholesale transaction prices which represent both the retailers' costs and the prices received by manufacturers, and (iii) a measure of manufacturers' costs - for twelve goods in two widely used consumer product categories. We simultaneously examine the extent of price rigidity for each of the twelve products at both, final goods and intermediate goods levels. We study two notions of price rigidity employed in the existing literature: (i) the frequency of price changes, and (ii) the response of prices to exogenous cost changes. We find that retail prices exhibit remarkable flexibility in terms of both notions of price rigidity. i.e., they change frequently and they seem to respond quickly and fully to cost changes. Furthermore, we find that retail prices respond not just to their direct costs, but also to the upstream manufacturers' costs, which further reinforces the extent of the retail price flexibility. At the intermediate goods level of the market, in contrast, we find relatively more evidence of rigidity in the response of manufacturers prices to cost changes. This despite the fact that wholesale prices change frequently and therefore exhibit flexibility according to the first notion of price rigidity.

Keywords: Price Flexibility; Price Rigidity; Final Goods Market; Intermediate Goods Market; Stages of Processing; Structural VAR; Scanner Data; Transaction Price Data; Frequency of Price Changes; Price Response to Exogeneous Cost Changes; Retail Price; Wholesale Price; New Keynesian Macroeconomics; How Markets Clear; Time Series Analysis; Orange Juice; Orange Juice Frozen Concentrate; Futures Market (search for similar items in EconPapers)
JEL-codes: E12 E31 E50 G13 L11 L16 L22 L66 L81 M21 M31 Q11 Q13 (search for similar items in EconPapers)
Pages: 66 pages
Date: 2004-02-07
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Note: Type of Document - pdf; prepared on Win 98; to print on Any printer; pages: 66; figures: Figures are included
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Related works:
Journal Article: Price flexibility in channels of distribution: Evidence from scanner data (2002)
Journal Article: Price Flexibility in Channels of Distribution: Evidence from Scanner Data (2002)
Working Paper: Price Flexibility in Channels of Distribution: Evidence from Scanner Data (2002)
Working Paper: Price flexibility in channels of distribution: Evidence from scanner data (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpma:0402018

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