Price‐setting Behavior in Turkish Industries: Evidence From Survey Data

Abstract

This study investigates the price-setting behavior of Turkish industries based on the results of a survey that was conducted by the Central Bank of the Republic of Turkey. The results show that, under normal conditions, the majority of the firms follow a timedependent pricing rule but when significant events occur a substantial fraction of them alter their behavior to state-dependent reviewing. The median Turkish firm reviews its prices every month, but changes its prices four times a year. Price reviews and changes are affected by: the market share, price discrimination, customer type, firm size, and the existence of regulated prices.

A theory of price adjustment under loss aversion

“…The importance of state-dependence for firms' pricing decisions is well documented. For instance, in the countries of the euro area (Fabiani et al, 2006;Nicolitsas, 2013), Scandinavia (Apel et al, 2005;Langbraaten et al, 2008;Ólafsson et al, 2011), the United States (Blinder et al, 1998), and Turkey (Şahinöz and Saraçoglu, 2008), approximately two third of the firms' pricing decisions are indeed driven by the current state of the environment. 5 Menu costs, by contrast, are clearly rejected as a significant driver for deferred price adjustments in each of the empirical studies above.…”

Price Rigidity in Turkey: Evidence from Micro Data

“…Meanwhile an extensive survey on pricing behavior of producers in manufacturing industry for Turkey is conducted by the Central Bank of Turkey (CBRT) and the main findings are reported by Karadaş et al (2006). Using this survey, Şahinöz and Saraçoğlu (2008) estimate the mean duration of producer prices in manufacturing industry as 3 months. Our study differs from the earlier examples for Turkey in the way that we provide evidence directly for consumer prices, rather than producer prices; and we consider a much higher coverage of the CPI, suggesting stronger external validity.…”

Price-setting Behavior and Competition in Developing Countries: an Analysis of Retail Outlets in Lesotho

“…For example, the share of firms using mark-up pricing relative to competitor pricing is substantially higher in Lesotho compared to countries in the Euro area (Alvarez et al 2006;Álvarez and Hernando 2007a) and the United Kingdom (Greenslade and Parker 2012). This also holds when comparing Lesotho to other emerging economies such as Turkey (Şahinőz and Saraçoğlu 2008) and Romania (Copaciu et al 2010). This evidence for imperfect competition is bolstered by survey responses to all three subsequent questions in Table 2, where fewer outlets report being concerned about competitors while setting prices.…”