Price Stickiness

AAA

DEFINITION of 'Price Stickiness'

The resistance of a price (or set of prices) to change, despite changes in the broad economy that suggest a different price is optimal. "Sticky" is a general economics term that can apply to any financial variable that is resistant to change. When applied to prices, it means that the prices charged for certain goods are reluctant to change despite changes in input cost or demand patterns.

Price stickiness can also occur in just one direction, as in "sticky-up" or "sticky-down". A price that is sticky-up, for instance, can move up rather easily but will only will move down with pronounced effort.

INVESTOPEDIA EXPLAINS 'Price Stickiness'

The fact that price stickiness exists can be attributed to several different forces, such as the costs to update pricing, including changes to marketing materials that must be made when prices do change. Part of price stickiness is also attributed to imperfect information in the markets, or non-rational decision-making by company executives. Some firms will try to keep prices constant as a business strategy, even though it is not sustainable based on material costs, labor, etc.

RELATED TERMS
  1. Sticky-Down

    A figure that can move higher relatively easily, but only will ...
  2. Sticky Wage Theory

    An economic hypothesis that the pay of employed workers tends ...
  3. Price Tension

    The phenomenon by which the seller of a particular good, service ...
  4. Minimum Wage

    The minimum amount of compensation an employee must receive for ...
  5. Inflation

    The rate at which the general level of prices for goods and services ...
  6. Financial Singlularity

    A financial singularity is the point at which investment decisions ...
RELATED FAQS
  1. What is the utility function and how is it calculated?

    In economics, utility function is an important concept that measures preferences over a set of goods and services. Utility ... Read Full Answer >>
  2. What does marginal utility tell us about consumer choice?

    In microeconomics, utility represents a way to relate the amount of goods consumed to the amount of happiness or satisfaction ... Read Full Answer >>
  3. What is the difference between JIT (just in time) and CMI (customer managed inventory)?

    Just-in-time (JIT) inventory management focuses solely on the need to replenish inventory only when it is required, reducing ... Read Full Answer >>
  4. What are some examples of Apple and Google's best-selling product lines?

    There are many good examples of product lines in the technology sector from some of the largest companies in the world, such ... Read Full Answer >>
  5. What is a negative write-off?

    A negative write-off is a write-off conducted by a company or accountant after deciding not to pay back an individual or ... Read Full Answer >>
  6. How can tariffs cause inefficiencies in domestic industries?

    Any government regulation naturally creates inefficiencies in a pure supply and demand marketplace. When it comes to the ... Read Full Answer >>
Related Articles
  1. Economics

    Why The Consumer Price Index Is Controversial

    Find out why economists are torn about how to calculate inflation.
  2. Bonds & Fixed Income

    Curbing The Effects Of Inflation

    Your investments suffer when general price levels rise. Learn how you can control the damage with IPSs.
  3. Forex Education

    Get To Know The Major Central Banks

    The policies of these banks affect the currency market like nothing else. See what makes them tick.
  4. Investing Basics

    Interest Rates And Your Bond Investments

    By understanding the factors that influence interest rates, you can learn to anticipate their movement and profit from it.
  5. Mutual Funds & ETFs

    ETF Analysis: Energy Select Sector SPDR

    Find out more about the Energy Select Sector SPDR Fund, the top holdings of this exchange-traded fund and the characteristics of the fund.
  6. Charts & Patterns

    Avoid The Perfection Trap In Trading

    Avoid the perfection trap and make peace with the market’s high levels of systematic noise.
  7. Investing News

    The Financial Singularity Will Destroy Your Return

    Given the current and future growth of financial technology, many believe algorithms will soon define what drives market outcomes. With a wealth of big data, algorithms would be able to create ...
  8. Economics

    What Does Inferior Good Mean?

    The term “inferior good” does not describe a lack of quality, but rather, is an economic term used when discussing elasticity of demand for a good.
  9. Economics

    What Is a Giffen Good?

    A Giffen good is a product whose demand increases as its price increases, and falls when its price falls.
  10. Economics

    What Does Going Concern Mean?

    Going concern is a concept used in business and accounting to describe the fiscal health of a company.

You May Also Like

Hot Definitions
  1. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  2. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  3. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  4. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  5. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  6. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!