The paper explains the observed asymmetric inflation response to value-added tax (VAT) changes in Hungary by calibrating a standard sectoral menu cost model on a new micro-level CPI data set. The model is able to reproduce important moments of the data, and finds that the asymmetry can be...

This paper develops an empirical method to identify the price effects of simultaneous mergers and to separate the different effects on the prices of the buyer and seller firms and on the prices of their respective competitors. Our difference-in-differences approach exploits variation in the...

Under perfect competition and constant returns to scale, firms producing homogeneous products set their prices equal to marginal costs, which also equal their average costs. However, the departure from these standard assumptions has important implications with respect to the derived theoretical...