NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Costs of Managerial Attention and Activity as a Source of Sticky Prices: Structural Estimates from an Online Market

Sara Fisher Ellison, Christopher Snyder, Hongkai Zhang

NBER Working Paper No. 24680
Issued in June 2018
NBER Program(s):Economic Fluctuations and Growth, Industrial Organization, Law and Economics, Productivity, Innovation, and Entrepreneurship

We study price dynamics for computer components sold on a price-comparison website. Our fine-grained data—a year of hourly price data for scores of rival retailers—allow us to estimate a dynamic model of competition, backing out structural estimates of managerial frictions. The estimated frictions are substantial, concentrated in the act of monitoring market conditions rather than entering a new price. We use our model to simulate the counterfactual gains from automated price setting and other managerial changes. Coupled with supporting reduced-form statistical evidence, our analysis provides a window into the process of managerial price setting and the microfoundation of pricing inertia, issues of growing interest in industrial organization and macroeconomics.

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Document Object Identifier (DOI): 10.3386/w24680

 
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