Etiqueta: Seminario de A&E

Implications of Consumer Loyalty for Price Dynamics when Price Adjustment is Costly

 

Mateusz Mysliwski.

(NHH).

Implications of Consumer Loyalty for Price Dynamics when Price Adjustment is Costly.

Abstract:
We study the implications of consumer switching costs on prices when price adjustments are costly. Existing theoretical and empirical works on consumer switching costs assume firms can change prices freely without any supply side frictions. We develop a dynamic game-theoretic model in which consumers exhibit inertia in their choices and firms compete in prices while facing costly price adjustments. We use the model to analyse the UK butter and margarine industry and estimate it with a rich scanner data set. The adjustment costs in our model can be interpreted as promotional fees which dairy suppliers pay to supermarkets. We find that price adjustment costs are substantial and represent between 24-34% of manufacturers’ net margins. We show that ignoring price adjustment costs can lead to substantial underprediction of the effects of consumer switching costs on prices. Our model predicts that the removal of promotional fees reduces firm costs and increases their profits without passing down benefits to the consumers.

Attendance confirmation.

A Revealed-Preference Approach to Measuring Information Frictions in Migration Decisions

 

 

Eduardo Morales.

(Princeton University).

A Revealed-Preference Approach to Measuring Information Frictions in Migration Decisions.

Abstract
«Labor demand shocks differ widely across regions within countries. Yet, migration patterns often do not respond to these regional shocks. Are workers’ limited migration responses due to lack of information about the potential net gains from regional migration? To answer this question, we analyze the mobility decisions of all formally employed workers in Brazil over 15 years. First, using a reduced-form approach, we document heterogeneous delay in reaction to positive local labor demand shocks: workers living in more distant regions and in regions with a lower degree of internet penetration tend to react more slowly to positive local labor demand shocks happening in other regions within the same country. Second, using a structural approach, we use model-based moment conditions and tests of overidentifying restrictions to test for the content of migrants’ information sets. Our preliminary results indicate that the precision of the information that workers have about labor market conditions in regions other than their region of residence decays strongly with distance. Agents located in regions with a better access to internet also appear to have more precise information.”

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