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Small price changes and menu costs
Author(s) -
Lach Saul,
Tsiddon Daniel
Publication year - 2007
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.1383
Subject(s) - economics , marginal cost , product (mathematics) , microeconomics , list price , price level , mid price , monetary economics , mathematics , finance , geometry , real estate
We find that while some individual price changes are indeed ‘small’, the average price change of different products within a store in any given month is not. Moreover, the smaller the price change of an individual product, the larger the average price change of the remaining products sold by the store. We argue that these findings are consistent with extensions of menu cost models of price‐setting behavior to multiproduct firms when these firms have high average costs and low marginal costs of changing prices. Copyright © 2007 John Wiley & Sons, Ltd.