Repricing Avalanches in the Billion-Prices Data
15 Pages Posted: 20 Aug 2021 Last revised: 2 Sep 2021
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Repricing Avalanches in the Billion-Prices Data
Repricing Avalanches in the Billion-Prices Data
Date Written: September 2, 2021
Abstract
Nirei and Scheinkman (2021) proposed an equilibrium model of price adjustments with menu-costs with a finite number of firms and derived a "reproduction number" for repricing and a limit functional form for the distribution of the number of simultaneously price-adjusting firms. We show that the distribution of price-changes in data from the Billion Prices Project is well fitted by this functional form and exhibits a reproduction number that is close to unity, indicating that complementarity in price-changes plays a major role in repricings.
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