Price-setting in the French manufacturing sector : New evidence from survey data

Abstract

La formation des prix dans les industries françaises : résultats d’enquêtes spécifiques Cet article examine les résultats d’une enquête conduite par la Banque de France durant l’hiver 2003-2004 afin d’étudier le comportement de fixation des prix par les entreprises industrielles. Les prix s’ajustent peu fréquemment; la firme médiane modifie le prix de son produit principal seulement une fois par an. Les examens de prix sont plus fréquents que les changements; puisque la firme médiane examine son prix tous les trimestres. Les firmes adoptent des règles soit time-dependent, soit state-dependent ou une combinaison des deux. Les défauts de coordination et les contrats nominaux (formels ou implicites) sont les sources les plus importantes de rigidité des prix, tandis que les seuils de prix psycho-logique et les coûts de catalogue sont considérés comme peu importants.

Identifying Price Reviews by Firms: An Econometric Approach

“…As our specification already controls for seasonal dummies, the observed duration dependence of price changes is not a consequence of the only “January effect.” Many firms review their prices on a yearly basis, but not necessarily in January each year. The importance of such time‐dependent factors is in line with the evidence from the numerous surveys conducted in the Euro area about firms pricing behaviors (see Loupias and Ricart or Fabiani et al. ) which point to the existence of a significant fraction of firms that adopt a time‐dependent calendar for price reviews.…”

“…At the other end of the spectrum, almost 60% of them review their prices at most three times per year. Loupias and Ricart () provide similar results for France: among firms declaring they review their prices on a regular basis, that is, among time‐dependent firms, 26% of firms review their prices monthly or weekly while 44% review them only once a year. We argue that our results, obtained from an econometric approach, are broadly consistent with these results.…”

“…For each of these variables, the information available is qualitative, and we distinguish three outcomes: decrease; no change; and increase . The “ Competition ” variable was obtained from the IPN French survey (see Loupias and Ricart ).…”

“…Seven outcomes are actually distinguished in the initial database, from large/medium/small decrease to small/medium/large increase through "no change." Given the small number of both "large" and The "Competition" variable was obtained from the IPN French survey (see Loupias and Ricart 2006).…”

“…We compute this figure based on the numbers provided in table of Loupias and Ricart (), as the average probability of implementing a price review based on the following correspondence between the frequency of price reviews and the probability of reviewing prices within a given month. Declaring reviewing prices monthly or weekly is associated with a probability 1 to review prices in a given month; reviewing prices quarterly is associated with a probability 1/3; twice a year with a probability 1/6; once a year with 1/12, and less than once a year with a probability 1/24.…”