Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/128407
Authors: 
Letterie, Wilko
Nilsen, Øivind Anti
Year of Publication: 
2016
Series/Report no.: 
CESifo Working Paper 5701
Abstract: 
We assess empirically the micro-foundations of producers’ sticky pricing behaviour. The intertemporal profit function considered accounts for various functional forms of menu costs. The focus is on the analysis of multiproduct plants, and the menu costs therefore also allow for economies of scope. The structural model developed is tested on a merged panel of monthly product- and plant-specific producer prices and yearly plant-specific producer statistics for Norwegian plants. We find evidence of linear and fixed menu costs that account for inaction of price adjustment. Convex menu costs are statistically significant but of moderate importance. Finally, our estimates suggest economies of scope in adjusting prices resulting in (incomplete) synchronization of price changes.
Subjects: 
price setting
micro data
multiproduct firms
JEL: 
E30
E31
Document Type: 
Working Paper

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