Sticky Prices as Coordination Failure: An Experimental Investigation

Last registered on January 24, 2023
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Pre-Trial

Trial Information

General Information

Title
Sticky Prices as Coordination Failure: An Experimental Investigation
RCT ID
AEARCTR-0010782
Initial registration date
January 16, 2023

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published
January 23, 2023, 6:42 AM EST

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Last updated
January 24, 2023, 3:17 PM EST

Last updated is the most recent time when changes to the trial's registration were published.

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Primary Investigator

Name
David Munro
Affiliation
Middlebury College
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Other Primary Investigator(s)

PI Name
Joy Buchanan
PI Affiliation
Samford University
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Additional Trial Information

Status
In development
Start date
2023-01-18
End date
2023-03-31
Keywords
Behavior
Additional Keywords
JEL code(s)
E70, E31, D40
Secondary IDs
Prior work
This trial does not extend or rely on any prior RCTs.
Abstract
Nominal rigidities play a central role in generating inefficiencies macroeconomics but our understanding of the underlying factors which cause these rigidities remains incomplete. In this project we leverage laboratory price setting games to gain further insights on the factors underlying sticky prices.
External Link(s)

Registration Citation

Citation
Buchanan, Joy and David Munro. 2023. "Sticky Prices as Coordination Failure: An Experimental Investigation." AEA RCT Registry. January 24. https://doi.org/10.1257/rct.10782-1.1
Sponsors & Partners
Experimental Details

Interventions

Intervention(s)
We will examine price setting behavior in laboratory markets where subjects act as firms. Each period firms receive new cost shocks and must decide how to adjust their prices.
Intervention Start Date
2023-01-18
Intervention End Date
2023-03-31

Primary Outcomes

Primary Outcomes (end points)
Prices
Primary Outcomes (explanation)
Most prominently, we are interested in share of subjects who adjust their price in response to cost shocks.

Secondary Outcomes

Secondary Outcomes (end points)
Beliefs, loss aversion.
Secondary Outcomes (explanation)
We are also interested in measuring how beliefs matter in price adjustment decisions and how they evolve over time as subjects experience the game. And we will elicit loss aversion at the end of the experiment to see if it correlates with subject decisions in the price setting games.

Experimental Design

Experimental Design
Experiment will be run with oTree software. We have designed price setting games with subjects compete with each other in a market (i.e. they act as firms). Our treatments will manipulate some feature of the market to explore how price setting behavior changes. Subjects will be randomized into groups.
Experimental Design Details
Not available
Randomization Method
Randomization done by computer.
Randomization Unit
Randomization will happen at the individual level (randomized into groups)
Was the treatment clustered?
Yes

Experiment Characteristics

Sample size: planned number of clusters
24 groups
Sample size: planned number of observations
120 individuals
Sample size (or number of clusters) by treatment arms
12 groups per treatment cluster
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
MDE is roughly a 25% difference in the price adjustment frequency. For a binary outcome (adjust/don't adjust), 5% significance and power of 0.9, we'd need 53 subjects to detect a 30ppt difference in the price adjustment frequency. So, with 60 subjects, we are closer to a 25% detectable difference. This should be enough to clearly distinguish between the different equilibria (100 vs. 0% adjustment frequencies).
Supporting Documents and Materials
IRB

Institutional Review Boards (IRBs)

IRB Name
Samford University
IRB Approval Date
2023-01-12
IRB Approval Number
EXMT-B-23-S-1
Analysis Plan