Abstract
Using micro-data on U.S. producer prices, we establish three new facts about price setting by multi-product firms. First, firms selling more goods adjust prices more frequently but on average by smaller amounts. Moreover, their fraction of positive price changes is lower and the dispersion of price changes is higher. Second, price changes within firms are substantially synchronized, which plays a dominant role in explaining pricing dynamics. Third, firms selling more goods have greater within-firm synchronization of price changes. A model with trend inflation and firm-specific menu costs where firms are subject to idiosyncratic and aggregate shocks matches the empirical findings.
•Multi-product firms׳ pricing depends on the number of goods.•All statistics exhibit clear trends in the number of goods.•Frequency and dispersion of price changes increase with the number of goods.•There is substantial synchronization of within-firm price changes.•State-dependent pricing model of multi-product firms matches the empirical findings.
