Multi-Product Pricing: Theory and Evidence From Large Retailers
TL;DR: In this article, the authors study a unique dataset with comprehensive coverage of daily prices in large multi-product retailers in Israel and develop a new model in which multiproduct firms face economies of scope in price adjustment, and synchronization is endogenous.
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Abstract: We study a unique dataset with comprehensive coverage of daily prices in large multi-product retailers in Israel. Retail stores synchronize price changes around occasional “peak” days when they reprice around 10% of their products. To assess aggregate implications of partial price synchronization, we develop a new model in which multi-product firms face economies of scope in price adjustment, and synchronization is endogenous. Synchronization of price changes attenuates the average price response to monetary shocks, but only high degrees of synchronization can substantially strengthen monetary non-neutrality. Our calibrated model generates as little monetary non-neutrality as in Golosov and Lucas (2007).
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Figures
Figure 12: Kurtosis of price-change distribution for various values of the FK synchronization measure. 
Figure 11: Selection component 1 + x̄∗f(x̄∗) and cumulative response for various values of the FK synchronization measure. Cumulative response of the GL model is normalized to 1. 
Figure 1: Daily fraction of prices changes, selected stores. 
Figure 3: Steady-state and price-change distributions for parameter values ρ = 0.04, σ = 0.25, K = 0.0001, c = 0.001. 
Figure 14: Impulse response functions for all models with fat-tailed shocks. 
Figure 15: Area under impulse response functions as a function of the kurtosis of price-change distribution.
Citations
The Real Effects of Monetary Shocks: Evidence from Micro Pricing Moments
TL;DR: This paper evaluated the informativeness of eight micro pricing moments for monetary non-neutrality and found that the ratio of kurtosis over frequency is significant only because of frequency, and insignificant when non-pricing moments are included.
References
Aggregate Dynamics and Staggered Contracts
TL;DR: In this article, the authors show that staggered wage contracts as short as 1 year are capable of generating the type of unemployment persistence which has been observed during postwar business cycles in the United States.
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Five Facts about Prices: A Reevaluation of Menu Cost Models
Emi Nakamura,Jon Steinsson +1 more
TL;DR: In this article, the authors show that the frequency of price change is highly seasonal: it is highest in the first quarter and then declines, and that price increases covaries strongly with inflation, whereas price decreases and the size of price increases and decreases do not.
Menu Costs and Phillips Curves
Mikhail Golosov,Robert E. Lucas +1 more
TL;DR: This article developed a model of a monetary economy in which individual firms are subject to idiosyncratic productivity shocks as well as general inflation, and calibrated this cost and the variance and autocorrelation of the idiosyncratic shock using a new U.S. data set of individual prices due to Klenow and Kryvtsov.
Menu Costs and the Neutrality of Money
Andrew Caplin,Daniel F. Spulber +1 more
TL;DR: In this paper, a model of endogenous price adjustment under money growth is presented, where firms follow (s,S) pricing policies, and price revisions are imperfectly synchronized, and the connection between firm price adjustment and relative price variability in the presence of monetary growth is investigated.
Managerial and Customer Costs of Price Adjustment: Direct Evidence from Industrial Markets
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