Business as usual: A consumer search theory of sticky prices and asymmetric price adjustment

Arbeitspapier

Empirical evidence suggests that prices are sticky with respect to cost changes. Moreover, prices respond more rapidly to cost increases than to cost decreases. We develop a search theoretic model which is consistent with this evidence and allows for additional testable predictions. Our results are based on the assumption that buyers do not observe the sellers costs, but know that cost changes are positively correlated across sellers. In equilibrium, a change in price is likely to induce consumer search, which explains sticky prices. Moreover, the signal conveyed by a price decrease is different from the signal conveyed by a price increase, which explains asymmetry in price adjustment.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Working Paper ; No. 2011-01

Klassifikation und Themen

• Klassifikation: Wirtschaft
• Thema: Preisrigidität ; Anpassungskosten ; Preismanagement ; Konsumentenverhalten ; Informationskosten ; Suchtheorie

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Cabral, Luís ; Fishman, Arthur
• Ereignis: Veröffentlichung
• (wer): Bar-Ilan University, Department of Economics
• (wo): Ramat-Gan
• (wann): 2010

Weitere Informationen

• Handle: http://hdl.handle.net/10419/96067
• Letzte Aktualisierung: 10.03.2025, 11:42 MEZ