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Price-setting and price-adjustment behavior for fast-moving consumer goods
Preissetzungs- und Preisangleichungsverhalten für kurzlebige Konsumgüter
[conference paper]
Corporate Editor
Zentrum für Umfragen, Methoden und Analysen -ZUMA-
Abstract "In many economic models, it is assumed that prices adjust instantaneously to changes of economic conditions (e.g., to shocks in demand or production costs). Since the existence of price rigidities has been frequently documented, more realistic models require that infrequent and lumpy price adjustme... view more
"In many economic models, it is assumed that prices adjust instantaneously to changes of economic conditions (e.g., to shocks in demand or production costs). Since the existence of price rigidities has been frequently documented, more realistic models require that infrequent and lumpy price adjustment have to be taken into account. There are still many unresolved issues in this area, both theoretically and empirically. In this paper, we show that the dynamics and dispersion of retail prices can be investigated using price data obtained from the GfK Consumer Panel for 1995. Our results document the importance of psychological pricing points for price setting, confirming results from many earlier studies. A new aspect of our analysis that has not been investigated in the literature is the relevance of psychological prices points for price adjustment and aggregation. We interpret our findings as suggestive evidence for the notion that rigidities are relevant for aggregate dynamics in Germany. However, we also confirm that a structural aggregation theory is necessary for a better understanding of the relevance of micro-level rigidities for aggregate dynamics. In such a more comprehensive model, price data obtained from the GfK Consumer Panel might also prove very helpful in the future. Among the three other areas of empirical research that could potentially be explored with price data from the GfK Consumer Panel, the analysis of the relationship between individual price dynamics, price dispersion and aggregate inflation proves particularly fruitful. Moreover, the very disaggregated, high-frequency data contained in this data-set are almost unique. In other research areas which require that prices changes (and not only distributions of prices) are observed over time, empirical tests unfortunately suffer from the fact that time series of individual prices can be constructed only under additional strong assumptions." (author's abstract)... view less
Keywords
price; consumer goods; formation of prices; price level; adaptation; pricing policy; consumer; buying behavior; economic model; dynamism; development; inflation; Federal Republic of Germany
Classification
National Economy
Method
empirical; quantitative empirical
Collection Title
Social and economic research with consumer panel data : proceedings of the first ZUMA Symposium on Consumer Panel Data, 5 and 6 October 1999
Editor
Papastefanou, Georgios; Schmidt, Peter; Börsch-Supan, Axel; Lüdtke, Hartmut; Oltersdorf, Ulrich
Conference
1. ZUMA Symposium on Consumer Panel Data. Mannheim, 1999
Document language
English
Publication Year
2001
City
Mannheim
Page/Pages
p. 95-113
Series
ZUMA-Nachrichten Spezial, 7
ISBN
3-924220-21-2
Status
Published Version; reviewed
Licence
Deposit Licence - No Redistribution, No Modifications