Prices and Market Shares in a Menu Cost Model ∗

  title={Prices and Market Shares in a Menu Cost Model ∗},
  author={Ariel Burstein and Christian Hellwig},
Pricing complementarities play a key role in determining the propagation of monetary disturbances in sticky price models. We propose a procedure to infer the degree of firm-level pricing complementarities in the context of a menu cost model of price adjustment using product-level data on prices and market shares. We then apply this procedure by calibrating our model (in which pricing complementarities are based on decreasing returns to scale at the product level) to one particular super-market… CONTINUE READING
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