AbstractThe present study investigates the underlying factors of price stickiness in German food retailing using fluid milk as a case study. We distinguish the duration between two actual price changes and two regular price changes as measures for price stickiness. Especially in the case of private labels, the choice of proxy for price rigidity has important implications. If we consider (regular) price changes, private label products are more (less) rigid than national brands. Price rigidity increases in the product’s average price. Prices of low priced private labels are rather flexible. Price adjustment of high priced private labels is similarly sluggish compared to national brands. We rationalize this finding with variable mark-ups under imperfect competition. In line with previous research, we find that price stickiness also depends on product attributes, retail formats, menu costs, psychological price points, and time-varying market conditions.
The Roles of Price Points and Menu Costs in Price Rigidity
