This dissertation studies asymmetric pricing in the small (APIS), where small price increases outnumber small price decreases, the asymmetry disappearing for larger price changes; and the corresponding reversed phenomenon (APIS-R). Current evidence suggests retailers deploy these pricing practices despite menu costs and potential consumer concerns. There is also evidence that inflation is only a partial contributor to the phenomena. These point to possible strategic intent driving these retail pricing practices. However, there are only a few papers in the domain, and none specifically address the cross-sectional and longitudinal variations. Further, existing results are mostly based on a single retailer, limited products, short time span, and legacy datasets dating back to the 1980s and 1990s, leaving their current relevance unsettled. Recent papers also question if small price changes are measurement artifacts. This dissertation addresses these gaps by analyzing several large contemporary datasets – a scanner dataset with more than 79 billion price observations and a matching consumer panel dataset with more than 50,000 participating panelists. Our key results imply the pricing practices can be retailers’ strategic responses to the cognitive tasks faced by consumers. Chapter 1 is a general introduction to the thesis. Chapter 2 sets up the fundamentals of the phenomena and reports robust evidence of APIS and APIS-R across the retail price spectrum. Chapter 3 examines the cross-sectional variations of the phenomena and finds that APIS and APIS-R are associated with product characteristics such as purchase frequency and category price level, as well as retail format such as HILO or EDLP. Chapter 4 explores the longitudinal variations and finds that business cycles are a major time-varying factor influencing retail practices of APIS and APIS-R. Chapter 5 concludes with reflections on the findings, implications for theory and practice, limitations, and suggestions for future studies. / Dissertation / Candidate in Philosophy / This dissertation studies asymmetric pricing in the small (APIS), where small price increases outnumber small price decreases, the asymmetry disappearing for larger price changes; and the corresponding reversed phenomenon (APIS-R). There are only a few papers in the domain, and none explain their cross-sectional and longitudinal variations. Existing results are mostly based on a single retailer, limited products, short time span, and legacy datasets dating back to the 1980s and 1990s, leaving their current relevance unsettled. Recent papers also question if small price changes are measurement artifacts. This dissertation addresses these gaps by analyzing several large contemporary datasets. The research finds robust evidence of both APIS and APIS-R in the retail price spectrum, and provides explanations for their cross-sectional variation, across products and retailers, as well as longitudinal variations, across business cycles. The results indicate the pricing practices can be retailers’ strategic responses to the cognitive tasks faced by consumers.

This study investigates the market conditions under which the Greek manufacturing sectors operate, and provides a formal measurement and determination of the observed degree of rigidity in nominal prices using panel modelling techniques. Two parameters in particular are found to capture the essence of market imperfections and price rigidity arising from various sources: the first parameter is conjectural variation elasticity which defines the degree of market divergence from perfect competition; and the last parameter refers to the speed of price adjustment towards the equilibrium level, which is estimated along with a set of important factors that affect this parameter. The data sample of this research consists of 56 3-digit manufacturing sectors, as defined by Eurostat (NACErev2) over the period 1980-2012, while the econometrical approach mainly incorporates the Fixed and Random Effects Model for panel data. The estimation process is divided into four steps: in the first step, the degree of market power and the speed of price adjustment are estimated for the whole manufacturing industry; in the second step, the same process is reiterated for the 3-digit sectors individually; in the third step the estimations are conducted for each year over 1980-2012; in the last step, the effects of a set of variables on the speed of price adjustment are estimated in order to provide an adequate interpretation of how market imperfections and price rigidities can be formed and how they relate to each other. By using the Greek economy as a case study, the empirical results provide significant evidence of a degree of market power similar to the one of a duopoly accompanied by relatively slow price adjustment in the 56 manufacturing sectors and the 33 years over 1980-2012.

Cette thèse se compose de trois articles sur les politiques budgétaires et monétaires optimales. Dans le premier article, J'étudie la détermination conjointe de la politique budgétaire et monétaire optimale dans un cadre néo-keynésien avec les marchés du travail frictionnels, de la monnaie et avec distortion des taux d'imposition du revenu du travail. Dans le premier article, je trouve que lorsque le pouvoir de négociation des travailleurs est faible, la politique Ramsey-optimale appelle à un taux optimal d'inflation annuel significativement plus élevé, au-delà de 9.5%, qui est aussi très volatile, au-delà de 7.4%. Le gouvernement Ramsey utilise l'inflation pour induire des fluctuations efficaces dans les marchés du travail, malgré le fait que l'évolution des prix est coûteuse et malgré la présence de la fiscalité du travail variant dans le temps. Les résultats quantitatifs montrent clairement que le planificateur s'appuie plus fortement sur l'inflation, pas sur l'impôts, pour lisser les distorsions dans l'économie au cours du cycle économique. En effet, il ya un compromis tout à fait clair entre le taux optimal de l'inflation et sa volatilité et le taux d'impôt sur le revenu optimal et sa variabilité. Le plus faible est le degré de rigidité des prix, le plus élevé sont le taux d'inflation optimal et la volatilité de l'inflation et le plus faible sont le taux d'impôt optimal sur le revenu et la volatilité de l'impôt sur le revenu. Pour dix fois plus petit degré de rigidité des prix, le taux d'inflation optimal et sa volatilité augmentent remarquablement, plus de 58% et 10%, respectivement, et le taux d'impôt optimal sur le revenu et sa volatilité déclinent de façon spectaculaire. Ces résultats sont d'une grande importance étant donné que dans les modèles frictionnels du marché du travail sans politique budgétaire et monnaie, ou dans les Nouveaux cadres keynésien même avec un riche éventail de rigidités réelles et nominales et un minuscule degré de rigidité des prix, la stabilité des prix semble être l'objectif central de la politique monétaire optimale. En l'absence de politique budgétaire et la demande de monnaie, le taux d'inflation optimal tombe très proche de zéro, avec une volatilité environ 97 pour cent moins, compatible avec la littérature. Dans le deuxième article, je montre comment les résultats quantitatifs impliquent que le pouvoir de négociation des travailleurs et les coûts de l'aide sociale de règles monétaires sont liées négativement. Autrement dit, le plus faible est le pouvoir de négociation des travailleurs, le plus grand sont les coûts sociaux des règles de politique monétaire. Toutefois, dans un contraste saisissant par rapport à la littérature, les règles qui régissent à la production et à l'étroitesse du marché du travail entraînent des coûts de bien-être considérablement plus faible que la règle de ciblage de l'inflation. C'est en particulier le cas pour la règle qui répond à l'étroitesse du marché du travail. Les coûts de l'aide sociale aussi baisse remarquablement en augmentant la taille du coefficient de production dans les règles monétaires. Mes résultats indiquent qu'en augmentant le pouvoir de négociation du travailleur au niveau Hosios ou plus, les coûts de l'aide sociale des trois règles monétaires diminuent significativement et la réponse à la production ou à la étroitesse du marché du travail n'entraîne plus une baisse des coûts de bien-être moindre que la règle de ciblage de l'inflation, qui est en ligne avec la littérature existante. Dans le troisième article, je montre d'abord que la règle Friedman dans un modèle monétaire avec une contrainte de type cash-in-advance pour les entreprises n’est pas optimale lorsque le gouvernement pour financer ses dépenses a accès à des taxes à distorsion sur la consommation. Je soutiens donc que, la règle Friedman en présence de ces taxes à distorsion est optimale si nous supposons un modèle avec travaie raw-efficace où seule le travaie raw est soumis à la contrainte de type cash-in-advance et la fonction d'utilité est homothétique dans deux types de main-d'oeuvre et séparable dans la consommation. Lorsque la fonction de production présente des rendements constants à l'échelle, contrairement au modèle des produits de trésorerie de crédit que les prix de ces deux produits sont les mêmes, la règle Friedman est optimal même lorsque les taux de salaire sont différents. Si la fonction de production des rendements d'échelle croissant ou decroissant, pour avoir l'optimalité de la règle Friedman, les taux de salaire doivent être égales. / This dissertation consists of three essays on optimal fiscal and monetary policies. In the first two essays, I consider New Keynesian frameworks with frictional labor markets, money and distortionary income tax rates. In the first one, I study the joint determination of optimal fiscal and monetary policy and the role of worker's bargaining power on this determination. In the second one, I study the effects of worker’s bargaining power on the welfare costs of three monetary policy rules, which are: inflation targeting and simple monetary rules that respond to output and labor market tightness, with and without interest-rate smoothing. In the third essay, I study the optimality of the Friedman rule in monetary economies where demand for money is motivated by firms, originated in a cash-in-advance constraint. In the first essay, I find that when the worker’s bargaining power is low, the Ramsey-optimal policy calls for a significantly high optimal annual rate of inflation, in excess of 9.5%, that is also highly volatile, in excess of 7.4%. The Ramsey government uses inflation to induce efficient fluctuations in labor markets, despite the fact that changing prices is costly and despite the presence of time-varying labor taxes. The quantitative results clearly show that the planner relies more heavily on inflation, not taxes, in smoothing distortions in the economy over the business cycle. Indeed, there is a quite clear trade-off between the optimal inflation rate and its volatility and the optimal income tax rate and its variability. The smaller is the degree of price stickiness, the higher are the optimal inflation rate and inflation volatility and the lower are the optimal income tax rate and income tax volatility. For a ten times smaller degree of price stickiness, the optimal rate of inflation and its volatility rise remarkably, over 58% and 10%, respectively, and the optimal income tax rate and its volatility decline dramatically. These results are significant given that in the frictional labor market models without fiscal policy and money, or in the Walrasian-based New Keynesian frameworks with even a rich array of real and nominal rigidities and for even a miniscule degree of price stickiness, price stability appears to be the central goal of optimal monetary policy. Absent fiscal policy and money demand frictions, optimal rate of inflation falls to very near zero, with a volatility about 97 percent lesser, consistent with the literature. In the second essay, I show how the quantitative results imply that worker's bargaining weight and welfare costs of monetary rules are related negatively. That is, the lower the bargaining power of workers, the larger the welfare losses of monetary rules. However, in a sharp contrast to the literature, the rules that respond to output and labor market tightness feature considerably lower welfare costs than the inflation targeting rule. This is specifically the case for the rule that responds to labor market tightness. The welfare costs also remarkably decline by increasing the size of the output coefficient in the monetary rules. My findings indicate that by raising the worker's bargaining power to the Hosios level and higher, welfare losses of the three monetary rules drop significantly and response to output or market tightness does not, anymore, imply lower welfare costs than the inflation targeting rule, which is in line with the existing literature. In the third essay, I first show that the Friedman rule in a monetary model with a cash-in-advance constraint for firms is not optimal when the government to finance its expenditures has access to distortionary taxes on consumption. I then argue that, the Friedman rule in the presence of these distorting taxes is optimal if we assume a model with raw-efficient labors where only the raw labor is subject to the cash-in-advance constraint and the utility function is homothetic in two types of labor and separable in consumption. Once the production function exhibits constant-returns-to-scale, unlike the cash-credit goods model that the prices of both goods are the same, the Friedman is optimal even when wage rates are different. If the production function has decreasing or increasing-returns-to-scale, then to have the optimality of the Friedman rule, wage rates should be equal.