Pricing Behaviour and Menu Costs in Multi-product Firms

W. Letterie*, O.A. Nilsen

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

This paper investigates the micro-foundations of pricing behaviour using monthly producer prices for Norwegian multi-product firms. We find both infrequent and many small price changes together with a high degree of within-firm synchronization. This points at fixed menu costs featuring scope economies, at additional linear and convex price adjustment costs, and at the presence of firm-specific shocks. The structural estimates and a simulation support the view that in order to understand pricing behaviour and the effectiveness of monetary policy, the analysis of multi-product firms and a richer price adjustment technology in the intermediate goods sector is valuable.
Original languageEnglish
Pages (from-to)746-769
Number of pages24
JournalEconomica
Volume89
Issue number355
Early online date10 Mar 2022
DOIs
Publication statusPublished - Jul 2022

Keywords

  • MODELS
  • INFLATION
  • ADJUSTMENTS
  • PRICES

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