Macroeconomic Implications of Uniform Pricing

RePEc Short ID: pko790
ORCID iD: 0000-0001-8464-2470

Daruich, Diego; Kozlowski, Julian

doi:10.20955/wp.2019.024

Working Paper Revision

Macroeconomic Implications of Uniform Pricing

Abstract: We compile a new database of grocery prices in Argentina, with over 9 million observations per day. We find uniform pricing both within and across regions—i.e., product prices almost do not vary within stores of a chain. Uniform pricing implies that prices would not change with regional conditions or shocks, particularly so if chains operate in several regions. We confirm this hypothesis using employment data. While prices in stores of chains operating almost exclusively in one region do react to changes in regional employment, stores of chains that operate in many regions do not seem to react to local labor market conditions. We study the impact of uniform pricing on estimates of local and aggregate elasticities in a regional model with multi-region firms and uniform pricing. The estimated model predicts an almost one-half smaller elasticity of prices to a regional than an aggregate shock. This result highlights that some caution may be necessary when using regional shocks to estimate aggregate elasticities, particularly when the relevant prices are set uniformly across regions.

Keywords: Uniform Pricing; Price Dispersion; Regional Economics;

JEL Classification: D40; E30; L10; R10;

https://doi.org/10.20955/wp.2019.024

Status: Published in American Economic Journal: Macroeconomics