The Federal Reserve Bank of New York works to promote sound and well-functioning financial systems and markets through its provision of industry and payment services, advancement of infrastructure reform in key markets and training and educational support to international institutions.
The Outreach and Education function engages, empowers and educates the Second District communities that the Bank serves, especially civic leaders, students, educators, small business owners, policymakers and the general public. It furthers the Bank's commitment to the region by listening to the communities we serve and leveraging our unique attributes to positively impact school and university programs, as well as analysis and research.
Sticky Prices: Why Firms Hesitate to Adjust the Price of Their Goods
November 2007 Volume 13, Number 10
JEL classification: E30, L10, F30, F10
Authors: Pinelopi Goldberg and Rebecca Hellerstein
Price stickiness—the tendency of prices to remain constant despite changes in supply and demand—has been linked to firms’ unwillingness to pay the costs entailed in setting, implementing, and advertising new prices. However, there is little consensus on the size and importance of these “repricing costs.” Taking the imported beer market as their subject, the authors of this study find repricing costs to be markedly higher for manufacturers than for retailers and conclude that, at the wholesale level, these costs are a significant deterrent to price adjustment.