NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Why Are Prices Sticky? The Dynamics of Wholesale Gasoline Prices

Michael C. Davis, James D. Hamilton

NBER Working Paper No. 9741
Issued in June 2003
NBER Program(s):   EFG   EEE

The menu-cost interpretation of sticky prices implies that the probability of a price change should depend on the past history of prices and fundamentals only through the gap between the current price and the frictionless price. We find that this prediction is broadly consistent with the behavior of 9 Philadelphia gasoline wholesalers. We nevertheless reject the menu-cost model as a literal description of these firms' behavior, arguing instead that price stickiness arises from strategic considerations of how customers and competitors will react to price changes.

download in pdf format
   (280 K)

email paper

This paper is available as PDF (280 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w9741

Published: Davis, Michael C. and James D. Hamilton. "Why Are Prices Sticky? The Dynamics Of Wholesale Gasoline Prices," Journal of Money, Credit and Banking, 2004, v36(1,Feb), 17-37. citation courtesy of

Users who downloaded this paper also downloaded these:
Borenstein and Shepard w4489 Dynamic Pricing in Retail Gasoline Markets
Blinder On Sticky Prices: Academic Theories Meet the Real World
Bils and Klenow w9069 Some Evidence on the Importance of Sticky Prices
Blinder w3646 Why are Prices Sticky? Preliminary Results from an Interview Study
Hughes, Knittel, and Sperling w12530 Evidence of a Shift in the Short-Run Price Elasticity of Gasoline Demand
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us