Price Stickiness

What is '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.

BREAKING DOWN '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. Menu Costs

    An economic term used to describe the cost incurred by firms ...
  2. Overshooting

    A phenomenon in economics used to explain why exchange rates ...
  3. Rate Of Change

    The speed at which a variable changes over a specific period ...
  4. Extended Normal Costing

    In managerial accounting, a method of tracking production costs ...
  5. Commodity Price Risk

    The threat that a change in the price of a production input will ...
  6. Accounting Change

    A change in accounting principles, accounting estimates, or the ...
Related Articles
  1. Economics

    Understanding Sticky Wage Theory

    The sticky wage theory states that workers’ earnings respond slowly to changes in the performance of the company or the economy.
  2. Personal Finance

    How to Manage Corporate Change in the Modern Economy

    Change can make employees uncomfortable, but these keys can help ease the transition and increase morale.
  3. Investing Basics

    Stocks Basics: What Causes Stock Prices To Change?

    Stock prices change every day as a result of market forces. By this we mean that share prices change because of supply and demand. If more people want to buy a stock (demand) than sell it (supply), ...
  4. Economics

    What Does Price Level Mean?

    Price level is the average of all current prices for goods and services in an economy.
  5. Economics

    Top Indicators From The Bureau of Labor Statistics

    Of the BLS indicators, the change in nonfarm payrolls and unemployment rate, as well as the CPI and PPI, are the ones most closely watched by investors.
  6. Investing

    The Key To Finding The Best Dividend Stocks On The Market

    While Wall Street analysts focus on how a company will fare in the next quarter, I'm always thinking about what a business will look like in five, 10 or even 20 years down the road. Some companies ...
  7. Economics

    Understanding Marginal Cost of Production

    Marginal cost of production is an economics term that refers to the change in production costs resulting from producing one more unit.
  8. Technical Indicators

    Interpreting Support And Resistance Zones

    Use of support and resistance zones can be a key to successful trades. Learn how they work and how to use them.
  9. Investing Basics

    Rising Prices: Inflation or Quality Improvements?

    Price indices are used to measure inflation, but qualitative improvements in products complicates attempts to isolate the true cause of rising prices.
  10. Forex Education

    How To Interpret Technical Analysis Price Patterns: Triple Tops And Bottoms

    Triple and double tops and bottoms may be tough to spot, but once you learn them, they can be powerful patterns.
RELATED FAQS
  1. How can I calculate a company's forward p/e in Excel?

    Discover why trading volume is higher when the price of a security changes. Supply and demand is the mechanism through which ... Read Answer >>
  2. How should an accountant correctly record and report a change in an accounting estimate?

    Read about how the FASB treats a change in accounting estimate and what businesses are required to report or disclose when ... Read Answer >>
  3. What is the difference between direct costs and variable costs?

    Learn about variable costs and direct costs, how direct costs and variable costs are classified and the differences between ... Read Answer >>
  4. How should a change in accounting principle be recorded and reported?

    Learn about changes in accounting principle and why businesses make them, as well as the reporting and recording requirements ... Read Answer >>
  5. Does the consumer price index (CPI) correlate with the change in price of goods and ...

    See why the consumer price index is a questionable proxy for inflation, and why it is unlikely to represent experiences with ... Read Answer >>
  6. How do fixed and variable costs each affect the marginal cost of production?

    Learn about the marginal cost of production, how to calculate the marginal cost, and how fixed costs and variable costs affect ... Read Answer >>
Hot Definitions
  1. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  2. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  3. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  4. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  5. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
  6. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
Trading Center