Thursday, July 21, 2011
Posted by D. Daniel Sokol
Martin Berka (Victoria University of Wellington), Michael B. Devereux (University of British Columbia) and Thomas Rudolph (St. Gallen) discuss Price Setting in a Leading Swiss Online Supermarket.
ABSTRACT: We study a newly released data set of scanner prices for food products in a large Swiss online supermarket. We find that average prices change about every two months, but when we exclude temporary sales, prices are extremely sticky, changing on average once every three years. Non-sale price behavior is broadly consistent with menu cost models of sticky prices. When we focus specifically on the behavior of sale prices, however, we find that the characteristics of price adjustment seems to be substantially at odds with standard theory.