Price Change Synchronization within and between Firms
In a publication in Economics Letters, Øivind Anti Nilsen, Håvard Skuterud, and Ingeborg Munthe-Kaas Webster provide evidence on price rigidity at the product- and firm-level in Norway with implications for the micro-foundations of macroeconomic models and the policy advice that is derived from them.
We congratulate Øivind on his latest publication in Economics Letters!
This paper provides evidence on price rigidity at the product- and firm-level in Norway. A strong within-firm synchronization is found supporting the theory of economies of scope in menu costs. The industry synchronization effects are found to be small suggesting that firms either have some monopoly power, or that a firm’s costs of changing their own prices may be larger than the benefit of responding to their competitors’ price changes. These findings have potentially important implications for the micro-foundations of macroeconomic models, and thus the policy advice derived from such models.
The paper is available at https://www.sciencedirect.com/science/article/pii/S016517652100344X?via%3Dihub