TY  - JOUR
AU  - Burstein,Ariel
AU  - Hellwig,Christian
TI  - Prices and Market Shares in a Menu Cost Model
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13455
PY  - 2007
Y2  - September 2007
UR  - http://www.nber.org/papers/w13455
L1  - http://www.nber.org/papers/w13455.pdf
N1  - Author contact info:
Ariel Burstein
Department of Economics
Bunche Hall 8365
Box 951477
UCLA
Los Angeles, CA 90095-1477
Tel: 310/206-6732
Fax: 310/825-9528
E-Mail: arielb@econ.ucla.edu

Christian Hellwig
Toulouse School of Economics
Manufacture de Tabacs,
21 Allées de Brienne,
31000 Toulouse
Tel: +33 5 61 12 85 93
Fax: +33 5 61 12 86 37
E-Mail: christian.hellwig@tse-fr.eu
AB  - Pricing complementarities play a key role in determining the propagation of monetary disturbances in sticky price models. We propose a procedure to infer the degree of firm-level pricing complementarities in the context of a menu cost model of price adjustment using data on prices and market shares at the level of individual varieties. We then apply this procedure by calibrating our model (in which pricing complementarities are based on decreasing returns to scale at the variety level) using scanner data from a large grocery chain. Our data is consistent with moderately strong levels of firm-level pricing complementarities, but they appear too weak to generate much larger aggregate real effects from nominal shocks than a model without these complementarities.
ER  -