Professor Thomas Holmes

CLA Economics
College of Liberal Arts
Twin Cities
Project Title: 
Pricing Frictions and Competition in US Retail

These researchers use newly collected data containing nearly 100 million observations to study price setting in US retail. They have documented significant heterogeneity in pricing, both across categories within firm, as well as within category across retailers. Some product categories approximate follow-the-leader strategies, but the probability that a rival responds depends on the popularity of the product. More popular products see more price adjustments over time and exhibit finer pricing. The group is developing a model of competing retailers where firms face frictions that cause rigid prices. These frictions are bounded using a moment inequalities approach. In counterfactual simulations, the researchers quantify how these frictions affect the occurrence of third-degree price discrimination and sticky prices in oligopoly.

Project Investigators

Professor Thomas Holmes
Sergio Marin Aranega
 
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