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Price Setting in Retailing: the Case of Uruguay

Borraz, Fernando and Zipitría, Leandro (2010): Price Setting in Retailing: the Case of Uruguay.

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Abstract

We use a rich and unique dataset of 20 million daily prices in groceries and supermarkets across the country to analyze stylized facts of the behaviour of consumer prices. Our findings are as follows: i) The median duration of prices is little over 2 months. Therefore, retail prices in Uruguay are less sticky than in the US but stickier than in the UK. ii) We do not find evidence of a seasonal pattern in the likelihood of price adjustments. iii) The frequency of price adjustment varies positively with expected inflation for the food and personal care product categories. However, in the alcohol and soft drink categories we find that firms increase the percentage points of the adjustment and not its frequency. iv) The probability of price change in the first day of the month is seven times higher than in any another day. v) The probability of a price change is not constant over time.

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