Estimates of the Aggregate Quarterly Capital Stock for the Post- War U.S. Economy

We construct quarterly aggregate gross and net capital stock series for the post-war U.S. economy using annual capital stock, capital depreciation, and capital discard figures along with quarterly investment series. We construct nominal and real measures of all three categories in the aggregate capital stock: consumer durable goods, producer durable goods, and business structures. In constructing the nominal series we take into account the changes in capital goods’ prices. The series are constructed using four different methods. Using time- and frequency domain techniques, we compare the constructed series and characterize their short-run, business cycle, and long-run cyclical properties. We find that the constructed series exhibit very different cyclical and shock persistence dynamics. Practical implications are discussed.Capital Stock, Consumer Durable Goods, Producer Durable Goods, Business Structures, Capital Depreciation and Discard, Capital Goods Prices, Frequency Domain, Cyclical Behavior, Linear Interpolation, Numerical Iteration

Boom in the West

Federal Reserve District, 12th ; Economic conditions - West (U.S.)

Weakening boom?

Federal Reserve District, 12th ; Economic conditions - West (U.S.)

Asymmetric Wholesale Pricing: Theory and Evidence

Asymmetric pricing is the phenomenon where prices rise more readily than they fall. We articulate, and provide empirical support for, a theory of asymmetric pricing in wholesale prices. In particular, we show how wholesale prices may be asymmetric in the small but symmetric in the large, when retailers face costs of price adjustments. Such retailers will not adjust prices for small changes in their costs. Upstream manufacturers then see a region of inelastic demand where small wholesale price changes do not translate into commensurate retail price changes. The implication is asymmetric – small wholesale increases are more profitable because manufacturers will not lose customers from higher retail prices; yet, small wholesale decreases are less profitable, because these will not create lower retail prices, hence no extra revenue from greater sales. For larger changes, this asymmetry at wholesale vanishes as the costs of changing prices are compensated by increases in retailers’ revenue that result from correspondingly large retail price changes. We first present a formal economic model of a channel with forward looking retailers facing costs of price adjustment to derive the testable propositions. Next, we test these on manufacturer prices in a supermarket scanner dataset to find support for our theory. We discuss the contributions of the results for the asymmetric pricing, distribution channels and cost of price adjustment literatures, and implications for public policy.Asymmetric Pricing, Channel Pricing, Costs of Price Adjustment, Menu Costs, Wholesale Prices, Channels of Distribution, Retailing, Scanner Data

Asymmetric Price Adjustment in the Small

Analyzing a large weekly retail transaction price dataset, we uncover a surprising regularity—small price increases occur more frequently than small price decreases for price changes of up to about 10 cents, while there is no such asymmetry for larger price changes. The asymmetry holds for the entire sample and for individual categories. We find that while inflation can explain some of the asymmetry, inflation is not the whole story as the asymmetry holds even after excluding inflationary periods from the data, and even for products whose price had not increased over the eight-year period. The findings hold for different measures of inflation and also after allowing for lagged price adjustments. We offer a consumer-based explanation for these findings.Asymmetric Price Adjustment; Price Rigidity; Rational Inattention; Rational Ignorance;

Asymmetric Price Adjustment "in the Small:" An Implication of Rational Inattention

Analyzing scanner price data that cover 27 product categories over an eight-year period from a large Mid-western supermarket chain, we uncover a surprising regularity in the data—small price increases occur more frequently than small price decreases. We find that this asymmetry holds for price changes of up to about 10 cents, on average. The asymmetry disappears for larger price changes. We document this finding for the entire data set, as well as for individual product categories. Further, we find that the asymmetry holds even after excluding from the data the observations pertaining to inflationary periods, and after allowing for various lengths of lagged price adjustment. The findings are insensitive also to the measure of price level used to measure inflation (the PPI or the CPI). To explain these findings, we extend the implications of the literature on rational inattention to individual price dynamics. Specifically, we argue that processing and reacting to price change information is a costly activity. An important implication of rational inattention is that consumers may rationally choose to ignore—and thus not to respond to—small price changes, creating a “range of inattention” along the demand curve. This range of consumer inattention, we argue, gives the retailers incentive for asymmetric price adjustment “in the small.” These incentives, however, disappear for large price changes, because large price changes are processed by consumers and therefore trigger their response. Thus, no asymmetry is observed “in the large.” An additional implication of rational inattention is that the extent of the asymmetry found “in the small” might vary over the business cycle: it might diminish during recessions and strengthen during expansions. We find that the data are indeed consistent with these predictions. An added contribution of the paper is that our theory may offer a possible explanation for the presence of small price changes, which has been a long-standing puzzle in the literature.Asymmetric Price Adjustment, Rational Inattention, Cost and Benefit of Information Acquiring and Processing, Price Rigidity

How Do Consumers Use Nutrition Labels on Food Products in the United States?

This study examined how consumers use food labels in the United States. Based on the results from the cluster analysis, eight nutrition label questions from the Health and Diet Survey fell into 2 categories of label usage: for shopping or for dietary decisions. Survey respondents reported equal or more consideration of nutrition-label information for dietary choices than for shopping decisions in 2008 compared with prior survey years. Female consumers, frequent label users, well-educated, consumers aged 50 to 59, or consumers with any health issues were significantly more likely to use food labels for all kinds of purposes than their corresponding counterparts

Price Points and Price Rigidity

We offer new evidence on the link between price points and price rigidity using two datasets. One is a large weekly transaction price dataset, covering 29 product categories over an eight-year period from a large U.S. supermarket chain. The other is from the Internet, and includes daily prices over a two-year period for 474 consumer electronic goods covering ten product categories, from 293 different Internet retailers. Across the two datasets, we find that (i) 9 is the most frequently used price-ending for the penny, dime, dollar and the ten-dollar digits, (ii) the most common price changes are in multiples of dimes, dollars, and ten-dollars, (iii) 9-ending prices are at least 24% (and as much as 73%) less likely to change in comparison to prices ending with other digits, and (iv) the average size of the price change is higher if the price ends with 9 in comparison to non-9-ending prices. This link between price points and price rigidity is robust across a wide range of prices, products, product categories, and retail formats. We offer a behavioral explanation for the findings.Price Point; 9-Ending Price; Price Rigidity; Rational Inattention; E-Commerce

Holiday Price Rigidity and Cost of Price Adjustment

The Thanksgiving-Christmas holiday period is a major sales period for US retailers. Due to higher store traffic, tasks such as restocking shelves, handling customers’ questions and inquiries, running cash registers, cleaning, and bagging, become more urgent during holidays. As a result, the holiday-period opportunity cost of price adjustment may increase dramatically for retail stores, which should lead to greater price rigidity during holidays. We test this prediction using weekly retail scanner price data from a major Midwestern supermarket chain. We find that indeed, prices are more rigid during holiday periods than non-holiday periods. For example, the econometric model we estimate suggests that the probability of a price change is lower during holiday periods, even after accounting for cost changes. Moreover, we find that the probability of a price change increases with the size of the cost change, during both, the holiday as well as non-holiday periods. We argue that these findings are best explained by higher price adjustment costs (menu cost) the retailers face during the holiday periods. Our data provides a natural experiment for studying variation in price rigidity because most aspects of market environment such as market structure, industry concentration, the nature of long-term relationships, contractual arrangements, etc., do not vary between holiday and nonholiday periods. We, therefore, are able to rule out these commonly used alternative explanations for the price rigidity, and conclude that the menu cost theory offers the best explanation for the holiday period price rigidity.