Holiday Price Rigidity and Cost of Price Adjustment

Daniel Levy (), Georg Muller, Shantanu Dutta and Mark Bergen
Additional contact information
Georg Muller: Litholink
Shantanu Dutta: USC
Mark Bergen: Minnesota

Macroeconomics from University Library of Munich, Germany

Abstract: Using unique retail and wholesale price data for 4,532 products carried by a major Midwestern grocery retailer, we find evidence of significant retail price rigidity during the Thanksgiving through Christmas holiday period relative to the rest of the year. We suggest that this pattern of holiday retail price rigidity is best explained by an increased opportunity cost of changing prices at these stores during the holiday period. Evidence based on discussions with retail managers suggests that during holidays the physical, managerial, and customer costs of changing prices rise considerably. Due to higher store traffic, performing tasks such as restocking shelves, handling customers’ questions and inquiries, running cash registers, cleaning, and bagging, become more urgent during holidays and thus receive priority. As a result, the holiday-period opportunity cost of price adjustment increases dramatically for the stores. The data provide a natural experimental setting to study variation in price rigidity because the products, stores, and surrounding institutional features and arrangements, including the market structure, the contractual arrangements, and the nature of relationships, etc., do not change between holiday and non-holiday weeks.

Keywords: Price Rigidity; Price Flexibility; Cost of Price Adjustment; Menu Cost; Holidays; Thanksgiving Holiday; Christmas Holiday; Scanner Data; Transaction Price Data; Retail Price; Wholesale Price; Natural Experiment; Opportunity Cost of Changing Price (search for similar items in EconPapers)
JEL-codes: E12 E31 E50 L11 L16 L22 L66 L81 M21 M31 Q11 Q13 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2004-02-07, Revised 2005-06-10
New Economics Papers: this item is included in nep-com and nep-ind
Note: Type of Document - pdf; prepared on Win 98; to print on Any printer; pages: 27 ; figures: There are no figures
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Citations: View citations in EconPapers (19)

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Related works:
Journal Article: Holiday Price Rigidity and Cost of Price Adjustment (2010)
Journal Article: Holiday Price Rigidity and Cost of Price Adjustment (2010)
Working Paper: Holiday Price Rigidity and Cost of Price Adjustment (2010)
Working Paper: Holiday Price Rigidity and Cost of Price Adjustment (2009)
Working Paper: Holiday Price Rigidity and Cost of Price Adjustment (2008)
Working Paper: Holiday Price Rigidity and Cost of Price Adjustment (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpma:0402019

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