Asymmetries in Price-Setting Behavior: New Microeconometric Evidence from Switzerland

Bo E. Honoré, Daniel Kaufmann, Sarah Lein

Research output: Contribution to journalArticle

4 Scopus citations

Abstract

In this paper, we follow the recent empirical literature that has specified reduced-form models for price setting that are closely tied to (S, s)-pricing rules. Our contribution to the literature is twofold. First, we propose an estimator that relaxes distributional assumptions on the unobserved heterogeneity. Second, we use the estimator to examine the prevalence of positive price changes in a low-inflation environment. Our model estimates suggest that, if inflation falls from 0.9% to zero, the share of positive price changes in all price changes falls from 63.6% to 56.2%.

Original languageEnglish (US)
Pages (from-to)211-236
Number of pages26
JournalJournal of Money, Credit and Banking
Volume44
Issue numberSUPPL. 2
DOIs
StatePublished - Dec 1 2012

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics

Keywords

  • Asymmetric price adjustment
  • CPI microdata
  • Front loading
  • Heterogeneity
  • Menu costs
  • Panel data

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