Publication

Analyzing a large weekly retail transaction price dataset, this paper uncovers a surprising regularity — small price increases occur more frequently than small price decreases for price changes of up to about 10 cents, while there is no such asymmetry for larger price changes. The authors find that inflation can explain only some of the asymmetry. The findings hold for different measures of inflation and also after allowing for lagged price adjustments. This paper offers a consumer-based explanation for these findings.