Using a model of dynamic price competition, we provide an explanation from the supply side for the well-established observation that output prices react faster in response to input cost increases than to decreases. When costs decline, the opportunity of profitable storing in anticipation of higher future costs allows competitive firms to coordinate on prices above current marginal costs. The initial price response is only partial and profitable storing relaxes competition. Conversely, when costs rise, storing is not beneficial in anticipation of lower future costs and firms immediately adjust their prices to current marginal costs, which entails the standard Bertrand outcome. Our results shed new light on the empirical evidence about asymmetric pricing and can stimulate further empirical investigation on this puzzle.

(2017). Asymmetric price adjustments: A supply side approach [journal article - articolo]. In INTERNATIONAL JOURNAL OF INDUSTRIAL ORGANIZATION. Retrieved from http://hdl.handle.net/10446/132091

Asymmetric price adjustments: A supply side approach

Fiocco, Raffaele;
2017-01-01

Abstract

Using a model of dynamic price competition, we provide an explanation from the supply side for the well-established observation that output prices react faster in response to input cost increases than to decreases. When costs decline, the opportunity of profitable storing in anticipation of higher future costs allows competitive firms to coordinate on prices above current marginal costs. The initial price response is only partial and profitable storing relaxes competition. Conversely, when costs rise, storing is not beneficial in anticipation of lower future costs and firms immediately adjust their prices to current marginal costs, which entails the standard Bertrand outcome. Our results shed new light on the empirical evidence about asymmetric pricing and can stimulate further empirical investigation on this puzzle.
articolo
2017
Antoniou, Fabio; Fiocco, Raffaele; Guo, Dongyu
(2017). Asymmetric price adjustments: A supply side approach [journal article - articolo]. In INTERNATIONAL JOURNAL OF INDUSTRIAL ORGANIZATION. Retrieved from http://hdl.handle.net/10446/132091
File allegato/i alla scheda:
File Dimensione del file Formato  
Asymmetric price adjustments. A supply side approach.pdf

Solo gestori di archivio

Versione: publisher's version - versione editoriale
Licenza: Licenza default Aisberg
Dimensione del file 597.03 kB
Formato Adobe PDF
597.03 kB Adobe PDF   Visualizza/Apri
Fiocco 132091.pdf

Open Access dal 30/11/2018

Descrizione: link to the formal publication via its DOI: 10.1016/j.ijindorg.2016.11.003
Versione: postprint - versione referata/accettata senza referaggio
Licenza: Creative commons
Dimensione del file 3.16 MB
Formato Adobe PDF
3.16 MB Adobe PDF Visualizza/Apri
Pubblicazioni consigliate

Aisberg ©2008 Servizi bibliotecari, Università degli studi di Bergamo | Terms of use/Condizioni di utilizzo

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10446/132091
Citazioni
  • Scopus 7
  • ???jsp.display-item.citation.isi??? 7
social impact