We present a new partial equilibrium theory of price adjustment, based on consumer loss aversion. In line with prospect theory, the consumers' perceived utility losses from price increases are weighted more heavily than the perceived utility gains from price decreases of equal magnitude. Price...

In this paper we do a statistical analysis of the Mexican Consumer Price Index microdata set to characterize the rigidities of the price setting process in the different sectors of the Mexican economy. The microdata set goes from July 2002 to December 2009. Broadly, results show that there...