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Pricing Decisions in the Euro AreaHow Firms Set Prices and Why$
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Silvia Fabiani, Claire Suzanne Loupias, Fernando Manuel Monteiro Martins, and Roberto Sabbatini

Print publication date: 2007

Print ISBN-13: 9780195309287

Published to Oxford Scholarship Online: September 2007

DOI: 10.1093/acprof:oso/9780195309287.001.0001

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The Pricing Behavior of Italian Firms

The Pricing Behavior of Italian Firms

New Survey Evidence on Price Stickiness

Chapter:
(p.110) 7 The Pricing Behavior of Italian Firms
Source:
Pricing Decisions in the Euro Area
Author(s):

Silvia Fabiani

Angela Gattulli

Roberto Sabbatini

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780195309287.003.0008

This chapter examines price setting behaviour of Italian firms on the basis of the results of a survey conducted by Banca d'Italia in early 2003 on a sample of around 350 firms belonging to all economic sectors. Prices are mostly fixed following standard mark-up rules, although customer-specific characteristics have a role and rival prices mostly affect price-setting strategies in industrial firms. In reviewing their prices, firms follow either state-dependent rules or a combination of time and state-dependent ones. The most important explanations of nominal rigidity are: explicit contracts, coordination failure and the perception of the temporary nature of the shock. Asymmetries are also important: cost shocks impact more when prices have to be raised than when they have to be reduced, whereas demand decreases are more likely to induce a price change than demand increases.

Keywords:   Italian firms, survey, price setting, price stickiness, explicit contracts, coordination failure, asymmetries

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