How Do U.K. Companies Set Prices?

Hall, Simon; Walsh, Mark P.; Yates, Anthony

doi:10.2139/ssrn.114948

Cited by 62 publications

(70 citation statements)

References 19 publications

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“…28 Looking at the frequencies of price changes found in similar surveys for other countries, our results are in line with the findings of Apel et al (2005) for Sweden, who report that the modal number of actual price changes per year lies at the yearly frequency. However, this yearly frequency is lower than the median frequencies of price changes per year found in Blinder et al (1998) for the United States, Hall et al (1997) for the United Kingdom and Amirault et al (2004) for Canada; they report 1.4, 2 and 4 price changes per year, respectively. The relatively low frequency of price adjustment in the euro area when compared to the United States is consistent with the empirical evidence based on the analysis of micro CPI data (see Dhyne et al, 2005) and on macro models (see Galí et al, 2003a).…”

Section: How Often Do Firms Change Their Prices?contrasting

confidence: 53%

“…He explained selected theories in face-to-face interviews with managers and assumed that they would recognise the line of reasoning if it came close to their way of thinking. All the national surveys on which this paper is based apply similar methodologies, presenting managers with different theories chosen according to their relevance in the economic literature, as well as their rankings in the surveys already conducted for other countries (Apel et al, 2005;Blinder et al, 1998;Hall et al, 1997). Before turning to the results, we summarise the most relevant theories.…”

Section: Why Do Firms Hold Prices Constant?mentioning

confidence: 99%

“…Based on this ranking, two groups of theories can be distinguished: the first consists of those theories that have an average score well above 2, while the second comprises the remaining ones. The last four columns of the table show the ranking of the same theories in the surveys by Blinder et al (1998) for the United States, Apel et al (2005) for Sweden, Hall et al (1997) for the United Kingdom and Amirault et al (2004) for Canada.…”

Section: Why Do Firms Hold Prices Constant?mentioning

confidence: 99%

“…2 This work has led to the conduct of similar surveys in other countries: Köhler (1996) in Germany, Hall et al (1997Hall et al ( , 2000 in the United Kingdom, Apel et al (2005) in Sweden and Amirault et al (2004) in Canada.…”

Section: Introductionmentioning

confidence: 96%

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The Pricing Behaviour of Firms in the Euro Area: New Survey Evidence

et al. 2005

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Editorial DirectorJan Smets, Member of the Board of Directors of the National Bank of Belgium Statement of purpose:The purpose of these working papers is to promote the circulation of research results (Research Series) and analytical studies (Documents Series) made within the National Bank of Belgium or presented by external economists in seminars, conferences and conventions organised by the Bank. The aim is therefore to provide a platform for discussion. The opinions expressed are strictly those of the authors and do not necessarily reflect the views of the National Bank of Belgium. AbstractThis study investigates the pricing behaviour of firms in the euro area on the basis of surveys conducted by nine Eurosystem national central banks. Overall, more than 11,000 firms participated in the survey. The results are very robust across countries. Firms operate in monopolistically competitive markets, where prices are mostly set following mark-up rules and where price discrimination is a common practice. Our evidence suggests that both time-and state-dependent pricing strategies are applied by firms in the euro area: around one-third of the companies follow mainly time-dependent pricing rules while two-thirds use pricing rules with some element of statedependence. Although the majority of firms take into account a wide range of information, including past and expected economic developments, about one-third adopts a purely backward-looking behaviour. The pattern of results lends support to the recent wave of estimations of hybrid versions of the New Keynesian Phillips Curve. Price stickiness arises both at the stage when firms review their prices and again when they actually change prices. The most relevant factors underlying price rigidity are customer relationships -as expressed in the theories about explicit and implicit contracts -and thus, are mainly found at the price changing (second) stage of the price adjustment process. Finally, we provide evidence that firms adjust prices asymmetrically in response to shocks, depending on the direction of the adjustment and the source of the shock: while cost shocks have a greater impact when prices have to be raised than when they have to be reduced, reductions in demand are more likely to induce a price change than increases in demand.

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Section: How Often Do Firms Change Their Prices?contrasting

confidence: 53%

Section: Why Do Firms Hold Prices Constant?mentioning

confidence: 99%

Section: Why Do Firms Hold Prices Constant?mentioning

confidence: 99%

Section: Introductionmentioning

confidence: 96%

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The Pricing Behaviour of Firms in the Euro Area: New Survey Evidence

et al. 2005

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“…More recently, more than half the 72 US firms (with annual revenues of $10 million and over p.a.) interviewed by Blinder (1991) reported that cost-based pricing was a moderate or very important factor in explaining price adjustment, while 37% of respondents in the Hall et al (1997) study of 654 UK companies use a cost-based pricing rule.…”

Section: A Model Of Technological Successionsmentioning

confidence: 99%

Structural change in the presence of network externalities: a co-evolutionary model of technological successions

Windrum

Birchenhall

2005

J Evol Econ

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The paper examines the conditions under which technological successions can occur in the presence of network externalities. A two-stage, multi-agent simulation model is presented in which product designs co-evolve with consumer preferences. It provides a rich framework in which to study the complex phenomenon of quality. Following an initial period, in which old technology firms develop their designs and externalities accrue, a technological shock occurs. New technology firms and new consumer classes enter the market. Data from the simulation model is analysed by identifying a robust econometric model of the probability of succession, given the immediate state of the post-shock market. 4 factors affecting the probability of a succession are identified. First, succession can occur if gains in direct utility from higher quality new technology goods outweigh the network utility of old technology goods. Second, sailing ship effects are possible. Old firms can innovate in order to see off the new entrants. Hence, a better initial (new technology) design does not guarantee succession. Third, a trade-off exists between quality and price. A succession will not occur if cost (price) differentials favour the old technology. Consequently, increasing returns in production enjoyed by established firms are an important barrier to successful entry. The fourth factor is time: the relative length of time old firms have to develop their products, and that which new firms have to develop their products.

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How are prices adjusted in response to shocks? Survey evidence from Austrian firms

Kwapil

Scharler²,

Baumgartner

2010

Manage Decis Econ

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In this paper we investigate the response of prices to shocks based on a survey of Austrian firms. We find that firms are more likely to change prices after a cost shock than after a demand shock. In this vein, our analysis suggests that regular customers are an important explanation for price rigidity after demand shocks. Furthermore, lacking competition is another significant explanation for price stickiness. Finally, we find asymmetric responses after cost and demand shocks. Prices appear to be more rigid downward than upward after cost shocks, while they are more rigid upward than downward in reaction to shifts in demand. Copyright © 2009 John Wiley & Sons, Ltd.

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How Do U.K. Companies Set Prices?

Cited by 62 publications

References 19 publications

The Pricing Behaviour of Firms in the Euro Area: New Survey Evidence

The Pricing Behaviour of Firms in the Euro Area: New Survey Evidence

Structural change in the presence of network externalities: a co-evolutionary model of technological successions

How are prices adjusted in response to shocks? Survey evidence from Austrian firms

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