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Vol. 59, No. 4, pp. 305-316 (2008)

“Stickiness in Producer and Consumer Prices -Investigation through Survey and Scanner Data-”
Naohito Abe (Institute of Economic Research, Hitotsubashi University), Akiyuki Tonogi (Graduate Student of Economics, Hitotsubashi University), Tsutomu Watanabe (Institute of Economic Research, Hitotsubashi University)

We ask Japanese manufacturing firms about their price setting behavior and obtain the following results. First, more than ninety percent of the responding firms report that their prices are sticky in the sense that they do not adjust their prices immediately in response to changes in demand or costs. They also report that such stickiness in prices mainly comes from various types of informational costs and strategic complementarity in price setting. Physical costs associated with price changes, such as menu costs, are reported to be unimportant. Second, more than one-third of the firms report that they have never changed their prices over the last decade, indicating that producer prices are much stickier in Japan than in other industrial countries. Third, we compare stickiness in producer and consumer prices by creating a unique dataset that combines the survey results for a product, which is identified by its barcode, with its retail price, which is obtained from the scanner data. Our main finding is that the producer price of a product tends to be by far stickier than the corresponding consumer price, and that there is no significant time-series correlation between the two prices. These two finding suggests that fluctuations in consumer prices come not from changes in the corresponding producer prices, but from changes in retailers' behaviors.