8. Staggered Price Setting: More Micro Foundations and Empirical Evidence

Transcription

1 8. Saggered rce Seng: More Mcro Foundaons and Emrcal Evdence John B. Taylor, May 8, 203

2 Oulne Dervaon from rof maxmzaon Reverse engneerng Brefly conras wh sae deenden models olcy mlcaons Emrcal evdence

3 Reverse Engneerng he Saggered rcng Euaons Basc dea : Derve rce euaon from rof maxmzng monoolscally comeve frmsha sell her roducs o comeve frms. Comeve frms' roducon ake N 2 for smlcy s assumed o be : [ 2 / where 0 Inu demand funcons can be derved from a cos mnmzaon : mn 2 2 wr, 2 subjec o roducon funcon akng nu rces as gven Form he Langrangan : L 2 2 and dfferenae : L L

4 x x x where / / / / / / / / / / / / / / / / / / / / / / 2 [ 2 [ 2 [ 2 [ 2 [ 2 : from he consran and 2 for 2 2 : 2, Solve for

5 2 2 2 or aroxmaely : / and where cos n he wo erods : margnal he weghed average of marku of be a The answer wll cos. margnal s where [ [ maxmze rofs o for more han one erod say 2 rce ses s roducng nermedae good Now frm / / / wh v v z z z z V V z z z V V z V V V Much lke basc saggered rce seng model.

6 Sae Deenden n Conras o Tme Deenden Models rce changes when he desred rce dffers by more han a secfed amoun from he curren rce Movaed by a fxed cos of changng he rce menu coss n he broades sense of he word A bg change n he money suly causes a bg ncrease n number rces changng In exreme money mgh have lle effec on ouu

7 Emrcal Work on rce Seng Early emrcal work Large varey of racces deendng on he marke Wages once er year very ycal, no only unon conracs rce adjusmen more freuen, bu no always magaznes Close o one-year duraon became a common assumon A key feaure of saggered wage and rce seng models s a revalng wage or rce whch affecs decsons Surveys of revalng wages are very common n seng wages Cause of erssence Ths does no haen wh erfecly flexble rce models. Nor does haen wh sae deenden models, whch behave much lke flexble rce models n ha here s lle erssence.

8 More Recen Emrcal Research Usng he CI ee Klenow Consumer rce ndex CI s based on a monhly survey of rces hroughou he U.S. Abou 400 BLS emloyees vs abou 20,000 real esablshmens and samle consumer rces. Indvdual rces are hen weghed accordng o a marke baske based on consumer exendure survey o ge he CI. These ndvdual rces rovde nformaon abou rce seng behavor Can be used o es, calbrae, modfy Had been unouched unl work sared by Klenow. Goes beyond earler work such as magazne rces

9 BLS-Research Daa Base Imoran Deals January 988-December years of monhly daa less one gves 9 monhs 85,000 rce uoes er monh Afer akng accoun of oulers, sock ous, seasonally unavalable ems, and relacemens, Klenow ges o abou 55,000 uoes. Dealng wh sale rces ercen V shaed aern Creae a regular rce seres

10 Medan me beween rce changes s around 4 monhs However, Nakamura and Sensson QJE 2008 laer found ha he medan duraon was beween 8 and monhs, afer correcng for sales.

11 A Decomoson of Aggregae Inflaon Le be he wegh of good n he CI Decomose nflaon each erod no - fracon of - averagesze of where I rces adjusng each erod 0 f model wh rces lasng hree monhs and /3 changng every monh he rce adjusmen each erod d - I and fr I / 3 f I - fr n monhly daa fr d. In a smle saggered conrac The urose of he decomoson s o es me deenden rcng fr s consan, or exogenous versus sae deenden rcng fr s varable, and endogenous

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