Pricing Madness

A new paper from Jeff Campbell and Ben Eden looks at prices of grocery store items and finds that:

1) The more recently a price has changed, the more likely it is to change again, even if you don’t count temporary sale items.

2) The dispersion of newly set prices is not less than the dispersion of all prices.

Point 1) runs contrary to what pretty much any sticky price model predicts; point 2) runs contrary to what you’d expect if stores were trying to bring their prices into line with the rest of the market.

If you’re looking for a resolution of all this, don’t come to me. I’m still working on why the gas station down the street offers senior citizen discounts on Wednesday afternoons.

And while we’re at it: How come a sandwich at the airport deli costs me twice as much as a sandwich at the deli down the block, but they’ll both sell me a newspaper for the exact same price?


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