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Food Processor Price Behavior: Firm‐Level Evidence of Sticky Prices
Author(s) -
Shonkwiler J. S.,
Taylor T. G.
Publication year - 1988
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.2307/1242063
Subject(s) - economics , revenue , rigidity (electromagnetism) , orange juice , monetary economics , microeconomics , food science , finance , chemistry , structural engineering , engineering
Firms in imperfectly competitive markets face direct and indirect costs when changing product prices. The latter costs reflect uncertain changes in revenue and market share resulting from the actions of rival firms. Rosett's friction model is applied to firm‐level data to provide estimates of the indirect costs of changing prices for a major processor of frozen concentrated orange juice. Results indicate that indirect costs cause significant price rigidity. Additionally the hypothesis that prices are equally rigid for upward and downward changes could not be rejected.