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Beyond Costs : The Dominant Role of Strategic Complementarities in Pricing / Elías Albagli, Francesco Grigoli, Emiliano Luttini, Dagoberto Quevedo, Marco Rojas.
- Format:
- Book
- Government document
- Author/Creator:
- Albagli, Elías.
- Series:
- IMF Working Papers; Working Paper ; No. 2025/164
- IMF Working Papers
- Language:
- English
- Physical Description:
- 1 online resource (64 pages)
- Place of Publication:
- Washington, D.C. : International Monetary Fund, 2025.
- Summary:
- This paper documents five empirical facts about the role of strategic complementarities in firms’ price-setting behavior, using administrative data from Chilean firms. (1) Strategic complementarities play a dominant role in price setting, exerting a stronger influence than changes in marginal costs. (2) While the strength of strategic complementarities varies across sectors, they consistently outweigh the role of cost changes. (3) In high-inflation environments, firms become more responsive to changes in the prices of their competitors. (4) Firms respond more strongly to competitor price increases than to decreases, mirroring the `rockets and feathers' phenomenon of costs. (5) Strategic complementarities are stronger among firms with fewer competitors, larger market shares, and broader customer bases. These findings suggest that strategic complementarities---a source of real rigidities---are sizable, state-dependent, asymmetric, and shaped by market structure.
- Notes:
- Description based on print version record.
- ISBN:
- 979-82-290-2251-4
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