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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

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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
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HF Commerce
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
Dates:
DateEvent
July 2020Published
11 May 2020Available
29 April 2020Accepted
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:
Project/Grant IDRIOXX Funder NameFunder ID
UNSPECIFIEDUniversidad del Rosariohttp://dx.doi.org/10.13039/501100008793
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