Costs of Managerial Attention and Activity as a Source of Sticky Prices: Structural Estimates from an Online Market

Ellison, Sara Fisher; Snyder, Christopher M.; Zhang, Hongkai

doi:10.2139/ssrn.2893754

Cited by 6 publications

(3 citation statements)

References 49 publications

(15 reference statements)

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“…This result suggests that markets with three or four big players have more price competition than markets with mostly small players. This finding is also in line with Ellison et al (2016) arguing that managers of small firms 24. All variables are in logs except for the share of price points and the Herfindahl index (each variable is between zero and one).…”

supporting

confidence: 90%

Price Setting in Online Markets: Does IT Click?

Gorodnichenko

Sheremirov

Talavera

2014

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Using a unique dataset of daily U.S. and U.K. price listings and the associated number of clicks for precisely defined goods from a major shopping platform, we shed new light on how prices are set in online markets, which have a number of special properties such as low search costs, low costs of monitoring competitors' prices, and low costs of nominal price adjustment. We document that although online prices change more frequently than offline prices, they nevertheless exhibit relatively long spells of fixed prices. By many metrics, such as large size and low synchronization of price changes, considerable cross-sectional dispersion, and low sensitivity to predictable or unanticipated changes in demand conditions, online prices are as imperfect as offline prices. Our findings suggest a need for more research on the sources of price rigidities and dispersion, as well as on the relative role of menu and search costs in online-pricing frictions. (JEL: E31, L11, L86)

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confidence: 90%

Price Setting in Online Markets: Does IT Click?

Gorodnichenko

Sheremirov

Talavera

2014

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“…High-price and low-price goods A simple explanation for relative price dispersion is managerial inattention (see, e.g., Ellison, Snyder, and Zhang 2015). Equally expensive stores may set persistently different prices for the same good because managers choose to not pay much attention to the price of low-ticket items.…”

Section: Productsmentioning

confidence: 99%

Relative Price Dispersion: Evidence and Theory

Kaplan

Menzio²,

Rudanko

et al. 2019

American Economic Journal: Microeconomics

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We are grateful to Bob Hall for comments on some of our previous work that inspired the current project. We are grateful to ABSTRACTWe use a large dataset on retail pricing to document that a sizeable portion of the cross-sectional variation in the price at which the same good trades in the same period and in the same market is due to the fact that stores that are, on average, equally expensive set persistently different prices for the same good. We refer to this phenomenon as relative price dispersion. We argue that relative price dispersion stems from sellers' attempts to discriminate between high-valuation buyers who need to make all of their purchases in the same store, and low-valuation buyers who are willing to purchase different items from different stores. We calibrate our theory and show that it is not only consistent with the extent and sources of dispersion in the price that different sellers charge for the same good, but also with the extent and sources of dispersion in the prices that different households pay for the same basket of goods, as well as with the relationship between prices paid and the number of stores visited by different households.

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“…A potential explanation for relative price dispersion is managerial inattention (Ellison et al 2015). According to this story, equally expensive stores may set persistently di¤erent prices for the same good because managers choose to not pay much attention to the price of low-ticket items.…”

Section: Figure 1 Distribution Of Normalized Pricesmentioning

confidence: 99%

Price Dispersion When Stores Sell Multiple Goods

Trachter¹

2017

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S earch frictions are a prominent departure from the standard style of model we tend to write, which relies on frictionless Walrasian markets. They are not only prominent because they help us construct interesting models where policy can play a particularly important role, but also because search frictions are relatively easy to measure in the data. A large fraction of the literature on search frictions dwells with models of product markets where, for one reason or another, customers face a cost to act in the market (i.e., pay a search or switching cost to switch stores, pay a cost to learn a set of prices, etc.). A well-known result in a large class of models (based on the seminal work of Burdett and Judd [1983]) is that price dispersion for identical goods arises in equilibrium.The empirical evidence on price dispersion for product marketsa good measure of the extent of the friction, as there should be no price dispersion for homogeneous goods in a Walrasian market -is large, mostly documenting dispersion for particular goods in retail markets. The literature abstracts from several important features of retail markets. One of these features is that most stores sell multiple goods, a feature that not only changes the measurement of search frictions, but also opens new avenues for theoretical research, given the scant availability of models of multiproduct pricing, i.e., models where …rms price multiple goods simultaneously. In this paper, I review the work of Kaplan et al. (2016) (KMRT from now on), which is a recent study on the empirical properties of price dispersion in a multiproduct setting and provides a model to rationalize it.The views expressed in this article are those of the author and do not necessarily represent those of the Federal Reserve Bank of Richmond or the Federal Reserve System.

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Costs of Managerial Attention and Activity as a Source of Sticky Prices: Structural Estimates from an Online Market

Cited by 6 publications

References 49 publications

Price Setting in Online Markets: Does IT Click?

Price Setting in Online Markets: Does IT Click?

Relative Price Dispersion: Evidence and Theory

Price Dispersion When Stores Sell Multiple Goods

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