Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/144313
Authors: 
Dossche, Maarten
Heylen, Freddy
Van den Poel, Dirk
Year of Publication: 
2006
Series/Report no.: 
Working Paper Research 99
Abstract: 
This paper uses scanner data from a large euro area retailer. We extend Deaton and Muellbauer's Almost Ideal Demand System to estimate the price elasticity and curvature of demand for a wide range of products. Our results support the introduction of a kinked (concave) demand curve in general equilibrium macro models. We find that the price elasticity of demand is on average higher for price increases than for price decreases. However, the degree of curvature in demand is much lower than is currently imposed. Moreover, for a significant fraction of products we observe a convex demand curve. We find no correlation between the estimated price elasticity/curvature and the observed size or frequency of price adjustment in our data
Subjects: 
price setting
real rigidity
kinked demand curve
behavioral AIDS
JEL: 
C33
D12
E3
Document Type: 
Working Paper

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