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Menu Costs (menu + cost)

Distribution by Scientific Domains
Business, Economics, Finance and Accounting100%

Selected Abstracts

Menu Costs, Nominal Wage Revisions, and Intracontract Wage Behavior

INDUSTRIAL RELATIONS, Issue 2 2002
Louis N. Christofides
We use data from indexed and nonindexed Canadian wage agreements to study the intracontract profile of nominal and real wages. Allowing for endogenous switching between the two indexation categories, we conclude that the number of nominal wage revisions depends on contract duration, expected inflation, and the cost of adjusting wages. Our results have implications for the menu cost, overlapping contracts, dynamic monopoly union, and efficient bargain literatures. [source]

Endogenous Cycles and Menu Costs: A Dynamic Macroeconomic Model of Monopoly

METROECONOMICA, Issue 1 2002
Kirsten Ralf
We present a dynamic model of price setting in which price adjustments are costly for the monopolist. The general price level changes endogenously due to welfare changes. For the resulting two-dimensional dynamical system the existence of a continuum of stationary points is proven. Furthermore, simulations show that endogenous cycles of output can occur. [source]

A joint test of market power, menu costs, and currency invoicing

AGRICULTURAL ECONOMICS, Issue 1 2009
Jean-Philippe Gervais
Exchange rate pass-through; Currency invoicing; Menu costs; Threshold estimation Abstract This article investigates exchange rate pass-through (ERPT) and currency invoicing decisions of Canadian pork exporters in the presence of menu costs. It is shown that when export prices are negotiated in the exporter's currency, menu costs cause threshold effects in the sense that there are bounds within (outside of) which price adjustments are not (are) observed. Conversely, the pass-through is not interrupted by menu costs when export prices are denominated in the importer's currency. The empirical model focuses on pork meat exports from two Canadian provinces to the U.S. and Japan. Hansen's (2000) threshold estimation procedure is used to jointly test for currency invoicing and incomplete pass-through in the presence of menu costs. Inference is conducted using the bootstrap with pre-pivoting methods to deal with nuisance parameters. The existence of menu cost is supported by the data in three of the four cases. It also appears that Quebec pork exporters have some market power and invoice in Japanese yen their exports to Japan. Manitoba exporters also seem to follow the same invoicing strategy, but their ability to increase their profit margin in response to large enough own-currency devaluations is questionable. Our currency invoicing results for sales to the U.S. are consistent with subsets of Canadian firms using either the Canadian or U.S. currency. [source]

Menu Costs, Nominal Wage Revisions, and Intracontract Wage Behavior

INDUSTRIAL RELATIONS, Issue 2 2002
Louis N. Christofides
We use data from indexed and nonindexed Canadian wage agreements to study the intracontract profile of nominal and real wages. Allowing for endogenous switching between the two indexation categories, we conclude that the number of nominal wage revisions depends on contract duration, expected inflation, and the cost of adjusting wages. Our results have implications for the menu cost, overlapping contracts, dynamic monopoly union, and efficient bargain literatures. [source]

A joint test of market power, menu costs, and currency invoicing

AGRICULTURAL ECONOMICS, Issue 1 2009
Jean-Philippe Gervais
Exchange rate pass-through; Currency invoicing; Menu costs; Threshold estimation Abstract This article investigates exchange rate pass-through (ERPT) and currency invoicing decisions of Canadian pork exporters in the presence of menu costs. It is shown that when export prices are negotiated in the exporter's currency, menu costs cause threshold effects in the sense that there are bounds within (outside of) which price adjustments are not (are) observed. Conversely, the pass-through is not interrupted by menu costs when export prices are denominated in the importer's currency. The empirical model focuses on pork meat exports from two Canadian provinces to the U.S. and Japan. Hansen's (2000) threshold estimation procedure is used to jointly test for currency invoicing and incomplete pass-through in the presence of menu costs. Inference is conducted using the bootstrap with pre-pivoting methods to deal with nuisance parameters. The existence of menu cost is supported by the data in three of the four cases. It also appears that Quebec pork exporters have some market power and invoice in Japanese yen their exports to Japan. Manitoba exporters also seem to follow the same invoicing strategy, but their ability to increase their profit margin in response to large enough own-currency devaluations is questionable. Our currency invoicing results for sales to the U.S. are consistent with subsets of Canadian firms using either the Canadian or U.S. currency. [source]

Interest rate transmission in the UK: a comparative analysis across financial firms and products

INTERNATIONAL JOURNAL OF FINANCE & ECONOMICS, Issue 1 2009
Ana-Maria Fuertes
Abstract This paper differentiates itself from the existing literature by testing for heterogeneities in the interest rate transmission mechanism using a large sample of 662 monthly retail rate histories (1993,2004) on seven key deposit and loan products. Error correction models are estimated to analyse the long-run pass-through, the long-run mark-up and the short-run speed of adjustment. The prediction that the official and retail rates move together in the long run is supported by the data. The evidence suggests weak between-product heterogeneity but notable differences were found between financial firms in the way they adjust their rates, which could hinder the achievement of monetary policy objectives. Consumer responses to official rate changes could therefore be more phased and intricate than hitherto believed. Heterogeneity in adjustment is found to be linked to menu costs and key financial ratios under managerial control. Copyright © 2008 John Wiley & Sons, Ltd. [source]

Why are gasoline prices sticky?

JOURNAL OF APPLIED ECONOMETRICS, Issue 6 2010
A test of alternative models of price adjustment
Macroeconomic models of business cycles rely on the assumption that firms adjust prices infrequently to generate the short-run non-neutrality of money documented by the monetary transmission literature. They posit different mechanisms to generate price stickiness, with correspondingly different implications for inflation dynamics. Using an autoregressive conditional binomial model, we test which mechanism is most consistent with the pattern of price adjustment found in daily wholesale gasoline price data. Our results lead us to reject menu costs and information-processing delays but suggest that strategic considerations related to the idea of ,fair pricing' play an important role in accounting for price stickiness. Copyright © 2009 John Wiley & Sons, Ltd. [source]

A joint test of market power, menu costs, and currency invoicing

AGRICULTURAL ECONOMICS, Issue 1 2009
Jean-Philippe Gervais
Exchange rate pass-through; Currency invoicing; Menu costs; Threshold estimation Abstract This article investigates exchange rate pass-through (ERPT) and currency invoicing decisions of Canadian pork exporters in the presence of menu costs. It is shown that when export prices are negotiated in the exporter's currency, menu costs cause threshold effects in the sense that there are bounds within (outside of) which price adjustments are not (are) observed. Conversely, the pass-through is not interrupted by menu costs when export prices are denominated in the importer's currency. The empirical model focuses on pork meat exports from two Canadian provinces to the U.S. and Japan. Hansen's (2000) threshold estimation procedure is used to jointly test for currency invoicing and incomplete pass-through in the presence of menu costs. Inference is conducted using the bootstrap with pre-pivoting methods to deal with nuisance parameters. The existence of menu cost is supported by the data in three of the four cases. It also appears that Quebec pork exporters have some market power and invoice in Japanese yen their exports to Japan. Manitoba exporters also seem to follow the same invoicing strategy, but their ability to increase their profit margin in response to large enough own-currency devaluations is questionable. Our currency invoicing results for sales to the U.S. are consistent with subsets of Canadian firms using either the Canadian or U.S. currency. [source]

Price adjustment in Italy: evidence from micro producer and consumer prices

MANAGERIAL AND DECISION ECONOMICS, Issue 2-3 2010
Silvia Fabiani
This paper investigates the behaviour of consumer and producer prices in Italy using micro data. The frequency of price changes is computed in order to obtain a quantitative measure of the unconditional degree of price rigidity at both the consumption and the production stage. On average, producer prices tend to remain unchanged for around 6 months, whereas consumer prices exhibit a longer duration, of 10 months. A comparison of the price behaviour of similar items confirms that prices are more flexible at the production stage. Prices, however, are not adjusted uniformly across sectors. The duration of producer prices is less for food and non-energy intermediate products and greater for non-food consumer and investment goods. At the consumption stage, price spells are longer for non-energy industrial goods and services, much shorter for energy products. In exploring the possible reasons for the differences, we observe that a higher share of labour in total costs is associated with lower frequency of price adjustment. Moreover, the structure and functioning of the retail sector in Italy may slow price adjustment at the consumption stage, together with other specific economic factors that affect mainly consumer price behaviour, such as menu costs and attractive pricing policies. Copyright © 2009 John Wiley & Sons, Ltd. [source]

Small price changes and menu costs

MANAGERIAL AND DECISION ECONOMICS, Issue 7 2007
Saul Lach
We find that while some individual price changes are indeed ,small', the average price change of different products within a store in any given month is not. Moreover, the smaller the price change of an individual product, the larger the average price change of the remaining products sold by the store. We argue that these findings are consistent with extensions of menu cost models of price-setting behavior to multiproduct firms when these firms have high average costs and low marginal costs of changing prices. Copyright © 2007 John Wiley & Sons, Ltd. [source]

The mechanics of price adjustment: new evidence on the (un)importance of menu costs

MANAGERIAL AND DECISION ECONOMICS, Issue 7 2007
Rajesh Chakrabarti
This paper examines nominal price rigidities in an environment, e-commerce, where literal menu costs can be assumed not to exist. We argue that if we can empirically show that nominal rigidities do still exist in the e-commerce environment, then it implies that other kinds of costs besides menu costs, such as management costs, must be causing these nominal rigidities. This evidence is of importance because of the central role that menu costs play in Keynesian macroeconomics. In this paper we examine the price changing behavior of two leading online booksellers,Amazon.com and BarnesandNoble.com,and find strong evidence that nominal price rigidities do indeed persist on the Internet. Copyright © 2007 John Wiley & Sons, Ltd. [source]