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- Title
Price-setting behaviour of Norwegian firms - results of a survey.
- Authors
Langbraaten, Nina; Nordbø, Einar W.
- Abstract
In the first half of 2007, Norges Bank conducted a survey of price-setting behaviour among a random sample of Norwegian firms. This article presents the results of the survey. The background to the survey is that modern monetary policy theory makes a number of assumptions about how the individual firm sets its prices. For example, it is often assumed that all firms are alike, that there is a certain interval between each time a price is changed, and that price-setters are forward-looking. At the same time, aggregate price movements are a result of all participants' pricing decisions. An insight into what determines prices at the individual firm is therefore very useful for a central bank. The results of the survey support a number of key theoretical assumptions. Almost half of the firms in the survey stated that they change their prices only once a year. Firms have some market power and set the price as a mark-up over costs, and expectations of the future play a role when firms set the price. Other results from the survey fit less well with the assumptions often made in the literature. For example, there are clear differences in price-setting behaviour between different types of firms. There is also little support for the direct costs associated with changing the price being an important reason why many prices remain unchanged over time.
- Subjects
MONETARY policy; MONETARY theory; BANKING industry; PRICES; MARGINAL pricing; PUBLIC spending; ABSORPTION costing; ECONOMIC policy
- Publication
Economic Bulletin (Norges Bank), 2008, Vol 79, Issue 2, p13
- ISSN
0029-1676
- Publication type
Article