Consumer price behaviour: evidence from Luxembourg micro data

Abstract We analyse micro‐level consumer price data in Luxembourg with a particular view on price change reversals and wage indexation. The median duration is roughly 8 months. On an average, price decreases are as large as price increases. With the exception of services, individual prices do not show signs of downward rigidity. Excluding price change reversals reduces the weighted frequency of price change from 17 to 12%. Accumulated price and wage inflation, automatic wage indexation, and the cash changeover increase the probability of a price change, whereas pricing at attractive pricing points and price regulation have the opposite effect. Copyright © 2010 John Wiley & Sons, Ltd.