Pass-Through in Retail and Wholesale / Emi Nakamura.

Format:

Book

Author/Creator:

Nakamura, Emi.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w13965.

NBER working paper series no. w13965

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2008.

Summary:

This paper studies how prices comove across products, firms and locations to gauge the relative importance of retailer versus manufacturer-level shocks in determining prices. I make use of a large panel data set on prices for a cross-section of retailers in the U.S. I analyze prices at the barcode or "Universal Product Code'' (UPC) level for individual stores. I find that only 16% of the variation in prices is common across stores selling an identical product. 65% of the price variation is common to stores within a particular retail chain (but not across retail chains), while 17% is completely idiosyncratic to the store and product. Product categories with frequent temporary "sales'' exhibit a disproportionate amount of completely idiosyncratic price variation. My results suggest that most of the observed price variation arises from retail-level rather than manufacturer-level demand and supply shocks. However, the behavior of prices is difficult to relate to observed variation in costs and demand at the retail level. This suggests that retail prices may vary largely as a consequence of dynamic pricing strategies on the part of retailers or manufacturers, rather than static demand and supply shocks.

Notes:

Print version record

April 2008.