Work

Price stickiness and strategic uncertainty: An experimental study

Year: 2025

Type: article

Abstract: We identify a minimal set of components to generate price stickiness by a laboratory experiment on an oligopolistic price settinggame. Our design involves repeated aggregate shocks to the market but features no uncertainty in their timing and magnitude, no real-nominal distinction, or no need to compute the best response to the prices of the other subjects. We find persistent price stickiness when prices are strategic complements and fully anticipated shocks lower the equilibrium price. We also explore the cause of the observed downward stickiness, and argue that it can be attributed to the presence of strategic uncertainty and strategic complementarity, combined with an asymmetric payoff structure such that adjusting an individual price faster than otherstoward the lower equilibrium price can potentially lead to a significant loss, compared to faster adjustment to the higher equilibrium price.

Source: Journal of Economic Dynamics and Control

DOI: 10.1016/j.jedc.2025.105186

Authors: Yukihiko Funaki, Kohei Kawamura, Kozo Ueda, Nobuyuki Uto

Institutions: Waseda University, Matsumoto University

Language: English

Topic: Experimental Behavioral Economics Studies

Subfield: Safety Research

Field: Social Sciences

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $3,270

Funders: Waseda University, University of Tokyo, Kyoto University, Japan Society for the Promotion of Science