DP5300 Heterogeneity in Consumer Price Stickiness: A Microeconometric Investigation

Author(s): Denis Fougère , Hervé Le Bihan , Patrick Sevestre

Publication Date: October 2005

Keyword(s): sticky prices , heterogeneity , hazard function , duration models

JEL(s): C41 , E31

Programme Areas: International Macroeconomics

Link to this Page: www.cepr.org/pubs/dps/DP5300.asp

This paper examines heterogeneity in price stickiness using a large, original, set of individual price data collected at the retail level for the computation of the French CPI. For that purpose, we estimate at a very high level of disaggregation competing-risks duration models that distinguish between price increases, price decreases and product replacements. The main findings are the following: i) cross-product and cross-outlet-type heterogeneity is pervasive, both in the shape of the hazard function and in the impact of covariates; ii) at the product-outlet type level, the baseline hazard function of a price spell is non-decreasing; iii) there is strong evidence of state dependence, especially for price increases.