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Price Stickiness in Portugal: Evidence from Survey Data

Fernando Martins
Managerial and Decision Economics
Vol. 31, No. 2/3, Special Issue: Price Setting and Price Adjustment in Some European Union Countries (MARCH-APRIL 2010), pp. 123-134
Published by: Wiley
Stable URL: http://www.jstor.org/stable/40606984
Page Count: 12
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Price Stickiness in Portugal: Evidence from Survey Data
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Abstract

This paper analyses the results of a survey conducted on a sample of Portuguese firms, with the main purpose of investigating their price setting behaviour. The evidence points to a considerable degree of price stickiness: most firms do not change prices more than once a year; time lags in price reactions to shocks are significant; and more than half of the firms follow time-dependent price reviewing and build their price decisions disregarding any indication of future economic developments. Implicit contracts between firms and their customers under which the former pledge to stabilise their prices as a way to increase customers' loyalty are apparently the main reason preventing firms from changing their prices more frequently. Copyright © 2009 John Wiley & Sons, Ltd.

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