This paper shows that price rigidity evolves in an economy populated by imperfectly rational agents who experiment with alternative rules of thumb. In the model, firms must set their prices in face of aggregate demand shocks. Their payoff depends on the level of aggregate demand, as well as on...

This paper examines the pass-through of cost-push shocks to customers at a granular level. Using unique firm-level survey data, we document five facts about pass-through across firms, sectors, and over time. We highlight a new channel relevant for pass-through: beliefs about the expected...

A growing recent literature relies on a precautionary pricing motive embedded in representative agent DSGE models with sticky prices and wages to generate negative output effects of uncertainty shocks. We assess whether this theoretical model channel is consistent with the data. Building a New...

We present a new partial equilibrium theory of price adjustment, based on consumer loss aversion. In line with prospect theory, the consumers' perceived utility losses from price increases are weighted more heavily than the perceived utility gains from price decreases of equal magnitude. Price...

This paper investigates how financial market imperfections and the frequency of price adjustment interact. Based on new firm-level evidence for Germany, we document that financially constrained firms adjust prices more often than their unconstrained counterparts, both upwards and downwards. We...

This paper investigates to what extent unregulated local monopolies attempt not to evoke the introduction of a formal price regulation by conforming to customers' and authorities' expectations. It is argued that utilities can meet expectations by setting prices that imitate neighbours' prices....

We estimate the effects of monetary policy on price-setting behavior in administrative micro data underlying the German producer price index. We find a strong degree of monetary nonneutrality. After expansionary monetary policy, the mass of additional price adjustments is economically small and...

The Generalized Calvo and the Generalized Taylor model of price and wage-setting are, unlike the standard Calvo and Taylor counter-parts, exactly consistent with the distribution of durations observed in the data. Using price and wage micro-data from a major euro-area economy (France), we...

In this paper we develop a multi-sector model of firms pricing behaviour under imperfect competition. We allow for the fact that some goods sold will be for final consumption, while others will be used as intermediate goods in further production. We assume that price setters are constrained by...

We take a monthly panel of German firms over the period 1980−2017 to examine the relative importance of time and state dependence in the decisions of firms to raise, lower or leave their price constant. In addition, we seek to estimate the relative importance of macroeconomic factors and...