| Author: | Slade, M. E. |
| Title: | Optimal pricing with costly adjustment: Evidence from retail-grocery prices |
| Journal: | Review of Economic Studies
1998 : JAN, VOL. 65:1, p. 87-107 |
| Index terms: | GROCERY SHOPS RETAILING PRICING COSTS DYNAMIC MODELS |
| Language: | eng |
| Abstract: | It is assumed that there are costs associated with adjusting prices. In this article the existence, type and magnitude of the costs are investigated empirically. The article develops a discrete-choice dynamic-programming model that nests fixed and variable costs, and obtains economic estimates of the adjustment-cost function. The data used to implement the model consist of weekly retail prices and sales of three brands sold by chains of grocery stores in USA. The data are highly disaggregate, variables are sampled at weekly intervals, the model nests fixed- and variable-adjustment costs and can therefore determine their relative importance. The discrete-choice model is structural and dynamic. |
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