Heterogeneity in Consumer Price Stickiness: A Microeconometric Investigation
44 Pages Posted: 29 Dec 2005
Date Written: October 2005
This paper examines heterogeneity in price stickiness using a large, original, set of individual price data collected at the retail level for the computation of the French CPI. For that purpose, we estimate at a very high level of disaggregation competing-risks duration models that distinguish between price increases, price decreases and product replacements. The main findings are the following: i) cross-product and cross-outlet-type heterogeneity is pervasive, both in the shape of the hazard function and in the impact of covariates; ii) at the product-outlet type level, the baseline hazard function of a price spell is non-decreasing; iii) there is strong evidence of state dependence, especially for price increases.
Keywords: Sticky prices, heterogeneity, hazard function, duration models
JEL Classification: C41, E31
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