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Rigidities and adjustments of daily prices to costs : evidence from supermarket data
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Giulietti, Monica, Otero, Jesus and Waterson, Michael (2020) Rigidities and adjustments of daily prices to costs : evidence from supermarket data. Journal of Economic Dynamics and Control, 116 . 103927. doi:10.1016/j.jedc.2020.103927
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Official URL: https://doi.org/10.1016/j.jedc.2020.103927
Abstract
We assess the extent of inertia in grocery retail prices using data on prices and costs from a large supermarket chain in Colombia. Relative to previous work our analysis benefits from encompassing a wide variety of products, availability of reliable replacement cost data, and the daily frequency of the data. We confirm the existence of significant nominal rigidities in reference prices (three months) and even more so in reference costs (about six months), but differing depending on the type of product, being on average smaller in the case of perishable goods. Using a non-linear autoregressive distributed lag (NARDL) approach to cointegration, we examine the path of prices relative to costs and determine the speed of adjustment of prices to shocks. We find significant mean reversion but also uncover asymmetries in response to positive and negative changes in costs. As a novel finding, we uncover evidence of the effect of market concentration, input price volatility, along with own labels and the perishable nature of products, on the likelihood of price asymmetry in response to costs changes.
| Item Type: | Journal Article | ||||||||
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| Subjects: | H Social Sciences > HB Economic Theory H Social Sciences > HF Commerce |
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| Divisions: | Faculty of Social Sciences > Economics | ||||||||
| Library of Congress Subject Headings (LCSH): | Prices, Cost, Retail trade, Supermarkets | ||||||||
| Journal or Publication Title: | Journal of Economic Dynamics and Control | ||||||||
| Publisher: | Elsevier BV | ||||||||
| ISSN: | 0165-1889 | ||||||||
| Official Date: | July 2020 | ||||||||
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| Date of first compliant deposit: | 14 May 2020 | ||||||||
| Volume: | 116 | ||||||||
| Article Number: | 103927 | ||||||||
| DOI: | 10.1016/j.jedc.2020.103927 | ||||||||
| Status: | Peer Reviewed | ||||||||
| Publication Status: | Published | ||||||||
| Access rights to Published version: | Restricted or Subscription Access | ||||||||
| RIOXX Funder/Project Grant: |
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