First published 1998
Consumer prices and wages resist change even when market forces demand adjustment. This phenomenon puzzles economists and sits at the heart of monetary policy debates. Alan Blinder and his collaborators tackle this riddle through direct investigation rather than theoretical speculation. They interview 200 corporate executives across multiple industries to test twelve competing theories about price stickiness. The survey uses plain language and realistic scenarios to probe how business leaders actually think about pricing decisions. Do companies avoid price changes because adjustment costs seem too high? Do they fear customers will interpret lower prices as signals of inferior quality? The research reveals which theories match reality and which exist only in academic imagination. Results challenge conventional wisdom in unexpected ways. Prices prove no easier to raise than to lower, and firms rarely engage in anticipatory pricing despite foreseeing cost increases. The study uncovers a previously overlooked driver of price rigidity: companies strongly resist actions that might annoy or inconvenience their customers. This customer-focused explanation emerges from real business practice rather than economic theory.
Genres: social-science, business, economics, non-fiction, academic
Vibes: intimate, suspenseful, thought-provoking
Tropes: academic-research, real-world-case-studies
400 pages · ebook · Russell Sage Foundation Publications