2017
DOI: 10.2139/ssrn.3000845
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Pricing Decisions under Financial Frictions: Evidence from the WDN Survey

Abstract: I test the predictions from Duca, Montero, Riggi and Zizza (2017), who develop a customermarket model with consumer switching costs and capital-market imperfections in which price-cost markups behave countercyclically, with a subsample of European fi rms participating in the Wage Dynamics Network 2014 survey. I use a novel empirical approach developed by Aakvik, Heckman and Vytlacil (2005) for estimating discrete choice models with binary endogenous regressors that allows for selection on unobservables. Result… Show more

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Cited by 2 publications
(1 citation statement)
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“…The above results add to the growing empirical evidence, which supports the notion that financial conditions of firms in the euro area affected their pricing decisions during the global financial crisis and its aftermath (see Montero and Urtasun, 2014;Antoun de Almedia, 2015;Montero, 2017;Duca et al, 2017). Combining the theory of customer markets with financial frictions provides a natural way to understand these new findings.…”
Section: Financial Conditions Prices Wages and Markupssupporting
confidence: 74%
“…The above results add to the growing empirical evidence, which supports the notion that financial conditions of firms in the euro area affected their pricing decisions during the global financial crisis and its aftermath (see Montero and Urtasun, 2014;Antoun de Almedia, 2015;Montero, 2017;Duca et al, 2017). Combining the theory of customer markets with financial frictions provides a natural way to understand these new findings.…”
Section: Financial Conditions Prices Wages and Markupssupporting
confidence: 74%