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  • 1. Zhumadilov, Daniyar Price stickiness: Durability, Cost of Price Adjustment and Price Memory

    Master of Arts, Miami University, 2017, Economics

    Using online daily price data I explore the validity of a theory relating price stickiness to price adjustment costs in the form of price setters' fear of alienating customers with frequent price changes. I argue that prices change more frequently for goods that are bought less often because of this price-setting strategy. I find that semi-durable goods (which are purchased more frequently than durable goods) change their prices less frequently than durable goods. However, non-durable goods change their prices more frequently than goods in other two categories. I attribute the latter relationship to the vital necessity of food, an important category within non-durable goods. While I find evidence that durable goods' price-change frequency is consistent with all models of price-adjustment costs, semi-durable and non-durable goods have price adjustment costs that are positively related to their prices. I argue that this difference in price adjustment costs is due to customer alienation costs, which are derived from customers' “price memory” (expectation of what a “fair” price for this good is).
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    Committee: Charles Moul (Advisor); George Davis (Committee Member); Jonathan Wolff (Committee Member) Subjects: Economics