Heterogeneity in Consumer Price Stickiness: A Microeconometric Investigation

We examine heterogeneity in price stickiness using a large, original, set of individual price data collected at the retail level for the computation of the French consumer price index. For that purpose, we estimate at a very high level of disaggregation, a piecewise-constant hazard model, as well as...

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Bibliographic Details
Published in:Journal of business & economic statistics 2007-07, Vol.25 (3), p.247-264
Main Authors: Fougère, Denis, Le Bihan, Hervé, Sevestre, Patrick
Format: Article
Language:English
Subjects:
Consumer Price Index
Data analysis
Datasets
Duration models
Economic models
Economics and Finance
Hazard function
Humanities and Social Sciences
Macroeconomic modeling
Menu costs
Modeling
Price changes
Price increases
Price stickiness
Sticky prices
Studies
Supermarkets
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Summary:We examine heterogeneity in price stickiness using a large, original, set of individual price data collected at the retail level for the computation of the French consumer price index. For that purpose, we estimate at a very high level of disaggregation, a piecewise-constant hazard model, as well as competing-risks duration models that distinguish between price increases, price decreases, and product replacements. The main findings are the following: (a) at the product-outlet-type level, the baseline hazard function of a price spell is nondecreasing; (b) cross-product and cross-outlet-type heterogeneity is pervasive, both in the shape and the level of the hazard function as well as in the impact of covariates; (c) there is strong evidence of state dependence, especially for price increases; (d) there is an asymmetry because determinants of price increases differ from those of price decreases.
ISSN:0735-0015
1537-2707
DOI:10.1198/073500107000000214