@article{69c0a73d5b544f46a89182b12e268c1e,
title = "Causes of retail price fixity: An empirical analysis",
abstract = "There are many plausible theoretical explanations for retail price fixity, but few empirical tests. This study develops a general theoretical model that nests several explanations within a real options framework. One unique implication of this model is that retail prices will exhibit greater fixity the more volatile are wholesale prices. Our empirical example supports the real options hypothesis as well as price rivalry, flat marginal cost curves, and consumer search or goodwill costs.",
keywords = "Friction model, Price fixity, Strategic pricing",
author = "Timothy Richards and Patterson, {Paul M.}",
note = "Funding Information: These other causes include goodwill costs, strategic rivalry, menu costs, and the structure of both demand and supply as potential complementary explanations. Assuming goodwill falls if a firm changes an otherwise stable price, own-price changes should widen the distance between upper and lower price change thresholds. Given that the estimates in Table 3 imply that both cumulative upward and downward price changes cause observed price changes in the same direction to be smaller, this result implies that price changes are attenuated by previous price changes. Hence, at least in these data, goodwill costs are a plausible cause of fixity. This effect is at least partially supported by strategic responses to others{\textquoteright} price changes. ",
year = "2004",
month = mar,
doi = "10.1016/j.jeconbus.2003.04.003",
language = "English (US)",
volume = "56",
pages = "117--136",
journal = "Journal of Economics and Business",
issn = "0148-6195",
publisher = "Elsevier Inc.",
number = "2",
}