سهم بازار و سختی قیمت
|کد مقاله||سال انتشار||تعداد صفحات مقاله انگلیسی||ترجمه فارسی|
|14183||2009||9 صفحه PDF||سفارش دهید|
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Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Journal of Monetary Economics, Volume 56, Issue 3, April 2009, Pages 344–352
Survey evidence shows that the main reason why firms keep prices stable is that they are concerned about losing customers or market share. We construct a general equilibrium model in which firms care about the size of their customer base. Firms and customers form long-term relationships because consumers incur costs to switch sellers. In an environment with sectoral productivity shocks, we show that cost pass-through is a non-monotonic function of the size of switching costs. Specifically, prices tend to become more stable as the fraction of repeat customers increases and the elasticity of the customer base falls.
Macroeconomists have a strong interest in understanding why prices are not more flexible. We focus on the following phenomenon: pass-through from marginal cost to prices is often incomplete. The most obvious example of “incomplete pass-through” is the relatively small impact of exchange rate changes on the retail price of imported goods. There is also evidence of incomplete pass-through both from wholesale to retail prices and in aggregate time-series data.1 These observations are inconsistent with the predictions of the standard monopolistic competition model. Our objective is to account for this behavior by introducing a real rigidity which we argue is closely related to firms’ actual price-setting practices. Over the last few years, considerable effort has been made by macroeconomists to identify stylized facts from micro price datasets with the hope of testing price rigidity mechanisms commonly used in macro models.2 In addition, some researchers have taken to the task of asking firms directly about their price-setting strategies. In surveys, firms report that the main reason they wish to keep prices stable is that they are concerned about losing customers or market share (Blinder et al., 1998 and Fabiani et al., 2005). In contrast, firms give much less weight to factors such as menu costs and costly information which are often emphasized as theoretical explanations for price rigidity. There is also evidence that the degree of price rigidity is related to customer base concerns (Amirault et al., 2006) and that firms with a higher proportion of repeat customers tend to have more rigid prices (Aucremanne and Druant, 2005 and Hall et al., 1997). Yet, the interaction between firms and customers has received surprisingly little attention in the macroeconomic literature.3 Our contribution is to take a step toward bridging this gap by embedding within a standard macro model the concept of customer base or market share. We show how the addition of this feature alters relative price dynamics yet retains the inherent tractability of the Dixit and Stiglitz (1977) framework. In our model, profit-maximizing firms care about the size of their customer base because this base determines future sales. Consumers decide how much of a product to consume and which firm to buy it from, creating a distinction between the extensive margin of sales (the number of customers) and the intensive margin (the quantity sold per customer). Firms and customers form long-term relationships because consumers incur costs to switch sellers. In this environment, firms view customers as long-lived assets. Consequently, they face an intertemporal tradeoff between increasing current profits and building market share for the future. Our model of imperfect competition is embedded into a general equilibrium framework where firms are buffeted by sectoral marginal cost shocks. In this environment, pass-through is incomplete and a function of the persistence of cost shocks. More importantly, we show that there is a non-monotonic relationship between the size of switching costs and the rate of pass-through. When switching costs are low, customers are likely to leave in the future and are therefore of little value to the firm. Consequently, firms pass-through a large fraction of marginal cost changes into their prices. As switching costs increase, customers become more attached and valuable, and pass-through falls. However, when switching costs are so high that customers never switch, the extensive margin is irrelevant and prices move one for one with marginal costs. This novel result implies that there is interesting heterogeneity in the price response across industries following marginal cost shocks. We argue that the model's predictions are in line with the available empirical evidence. Price-setting surveys show that firms which are most concerned about customer relations and with the highest proportion of repeat customers report more stable prices. Our results are of interest to macroeconomists for at least two reasons. First, to understand how firms respond to non-aggregate shocks is inherently interesting given the prevalence of such shocks (Golosov and Lucas, 2007). Second, it is well known that nominal frictions must be combined with real rigidities in order for nominal shocks to have significant and persistent real effects. The outline of the paper is as follows. Section 2 describes the economic environment as well as the maximization problems faced by households and firms. Section 3 presents our findings for the dynamic environment and explains the intuition behind the results. Section 4 concludes.
نتیجه گیری انگلیسی
We show that a standard macro model in which firms and households form long-term relationships can deliver incomplete pass-through of sector-specific cost shocks. Given that firms view customer-related factors as the main impediments to having more flexible prices, we believe that our mechanism offers a sensible and interesting theory of price rigidity. In the model, customer base dynamics arise because consumers face costs of switching to a different supplier. It is shown that cost pass-through is a non-monotonic function of the size of switching costs, and that prices tend to become more stable as the fraction of repeat customers increases and the elasticity of the customer base falls. Based on surveys offirms’ pricing behavior, we argue that those results are in line with the empirical evidence and that they offer a potential explanation for some of the heterogeneity in price rigidity observed in the data. However, more empirical work needs to be done on the subject. As switching costs are difficult to quantify, it might prove easier to find a measure of repeated interaction between sellers and customers, and relate it to the degree of price rigidity. Another test of our mechanism could be based on the scanner price datasets that have become increasingly popular in empirical studies of price rigidity. For example, in the context of grocery store data, the framework could be modified by introducing switching costs at both the store and product level and allow for a wider range of shocks. Beyond studying the implications for prices, it would allow us to exploit the model’s predictions about market share dynamics. One could also interact the real rigidity we propose with some nominal rigidities. While the evidence suggests that menu costs per se do not play a major role in firms’ pricing decisions, it is conceivable that a small amount of menu costs coupled with our mechanism could produce significant price stickiness and real effects from monetary shocks. Finally, a natural application of the model is in the context of international economics: in markets where both domestic and foreign firms compete, movements in the real exchange rate create a wedge between their marginal costs expressed in a common currency. In our framework, exporters would find it optimal to pass-through only a fraction of exchange rate fluctuations in order to stabilize their market share. 17 This prediction is supported by the large empirical literature on exchange rate pass-through