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Why Are Prices Sticky? The Dynamics of Wholesale Gasoline Prices / Michael C. Davis, James D. Hamilton.
- Format:
- Book
- Author/Creator:
- Davis, Michael C.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w9741.
- NBER working paper series no. w9741
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2003.
- Summary:
- The menu-cost interpretation of sticky prices implies that the probability of a price change should depend on the past history of prices and fundamentals only through the gap between the current price and the frictionless price. We find that this prediction is broadly consistent with the behavior of 9 Philadelphia gasoline wholesalers. We nevertheless reject the menu-cost model as a literal description of these firms' behavior, arguing instead that price stickiness arises from strategic considerations of how customers and competitors will react to price changes.
- Notes:
- Print version record
- June 2003.
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