Date Added: Jun 2011
In this paper, the authors use a new database of scanner-level prices for the Chilean economy to characterize the microeconomic behavior of prices during a period of high inflation. They are able to characterize the price-setting behavior by supermarket chain. The evidence indicates that there is significant heterogeneity in the pricing behavior of individual retailers. Analyzing the source of shocks, results show that even though chain-specific shocks account for a sizable fraction of the observed variation, common (i.e. countrywide) shocks to individual goods and product categories are the most important factors to explain the behavior of prices. In other words, the pricing strategy of retailers seems less important in developing countries to explain microeconomic price dynamics.