PRICE SETTING PRACTICES IN GREECE:
EVIDENCE FROM A SMALL-SCALE FIRM-LEVEL SURVEY
Bank of Greece
The paper documents the price setting practices followed by some 400 or so firms operating in Greece. Survey replies reveal: a low percentage of firms changing prices with frequency higher than annual; staggering of price changes during the year; sluggish adjustment of prices to cost shocks; asymmetries in price adjustment across positive and negative cost shocks and a speedier adjustment to increases in costs than to reductions in demand. The data confirm cross-sectional variations in price setting practices found also for other countries. On the basis of the results reached the conjecture that the prevalence of small firms, of firms providing services to businesses and of firms active in tourism-related activities might lie behind the inflation persistence exhibited until recently in Greece appears plausible.
Keywords: price setting; competition; survey data
JEL codes: E31, C41, J31, J41
Acknowledgments: The views expressed in this paper are the author's and do not necessarily coincide with the views of the Bank of Greece or the ESCB. Thanks are due to P. Politis (IOBE) and I. Sabethai (BoG) for their insights in making the WDN questionnaire applicable to firms located in Greece, to H. Gibson and G. Tavlas for supporting this project, to the Foundation for Economic and Industrial Research (IOBE), and especially A.Tsakanikas, for conducting the survey on behalf of the Bank of Greece, and to the contact persons in the participating firms for their time. For their insightful comments on earlier versions of this paper thanks are due to H. Gibson, C. Kanellopoulos, T. Kosma, H. Le Bihan, D. Moschos, G. Symigiannis, E. Zervoudakis and members of the WDN survey group. The usual disclaimer applies.
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