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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

(p.110) 7 The Pricing Behavior of Italian Firms
Pricing Decisions in the Euro Area

Silvia Fabiani

Angela Gattulli

Roberto Sabbatini

Oxford University Press

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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