Beyond the Costs of Price Adjustment: Investments in Pricing Capital
- Topics:
- Price Optimization
- Tags:
- Adjustment,
- Investment,
- Mark Bergen & Associates,
- Marketing,
- Marketing Research,
- Pricing,
- Pricing Strategy
- Source:
- Mark Bergen & Associates
FREE Registration is required
Overview: The literature on costs of price adjustment has long argued that changing prices is a complex and costly process. In fact, some authors have suggested that one should think of firms’ price-setting activities as “producing” prices, similar to the way firms use production processes to produce goods and services. In this paper one will explore one natural extension of this view, that besides observing costs of price adjustment, should also expect to see firm-level investments in capital expenditures into these “pricing” production processes. Using three types of data sources, one finds compelling evidence of the existence as well as the importance of pricing capital in firms. Moreover, it has been observed that “pricing capital” introduces a new, higher-level, pricing decision made by individual firms. Furthermore, since pricing capital is a choice variable, it implies that costs of price adjustment often used in models of price rigidity are endogenous. As such, pricing capital offers new insights into the micro-foundations of the costs of price adjustment.
(Is this item miscategorized? Does it need more tags? Let us know.)
Format: WORD | Date: Apr 2002 | Pages: 45
People who downloaded this item also downloaded
 |
The New Emerging Markets |
|
2005 Emerging Market Outlook |
