NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Craig Benedict

450 Mahar Hall
Oswego, NY 13126-3599

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: SUNY Oswego

NBER Working Papers and Publications

August 2016On What States Do Prices Depend? Answers From Ecuador
with Mario J. Crucini, Anthony Landry: w22506
In this paper, we argue that differences in the cost structure across sectors play an important role in the decision of firms to adjust their prices. We develop a menu-cost model of pricing in which retail firms intermediate trade between producers and consumers. An important facet of our analysis is that the labor-cost share of retail production differs across goods and services in the consumption basket. For example, the price of gasoline at the retail pump is predicted to adjust more frequently and by more than the price of a haircut due to the high volatility in wholesale gasoline prices relative to the wages of unskilled labor, even when both retailers face a common menu cost. This modeling approach allows us to account for some of the cross-sectional differences observed in the frequ...
 
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