Price Rigidity Analysis: Evidence from the E-Commerce Market

Abstract

The article studies price rigidity for food, non-food products and services based on daily data of online retailers in Moscow collected for the period from February 2019 to May 2020. It was found that the average price invariance period was 19.5 days. In addition, there is significant heterogeneity in the frequency of price changes: food prices change more often than non-food ones, and the cost of services changes the least often. The observed price behavior confirms the implications of time- and state-dependent models. The dependence on time is indicated, for example, by the fact that the probability of price changes sharply increases by days 335 and 353 of their invariability. This fact reinforces the conclusions on the presence of seasonality in price changes found in a number of foreign studies. The analysis also suggests that, in March–May 2020, growth in uncertainty caused by the coronavirus pandemic led to firms beginning to change prices more often and by a smaller magnitude. As a result, the share of price increases went up from 50.2% in March–May 2019 to 62.7% in March–May 2020. The number of days in which prices for any goods and services increased rose from 65 to 84 (out of 92 days in March–May). Thus, the results of this paper confirm that pricing behavior on the e-commerce market can vary significantly depending on economic conditions.