Sticky-Down

AAA

DEFINITION of 'Sticky-Down'

The tendency of a price to move up easily but prove quite resistant to moving down. Sticky-down is an extension of “price stickiness,” which is the resistance of a price or set of prices to change. Sticky-down prices may be due to imperfect information or poor decisions made by management. Sticky-down prices for goods that consumers know should be substantially lower may foster anger and resentment, since these prices will be perceived as an attempt to “gouge” consumers.

INVESTOPEDIA EXPLAINS 'Sticky-Down'

Fuel prices at the petrol pump or gas station are a great example of the sticky-down phenomenon. When crude oil rises beyond $100 per barrel, pump prices in Canada rise in tandem with the price of crude (or sometimes even faster). Say the price is $1.40 per liter when crude oil is at $110. But if crude oil falls by $10 overnight because the fear premium embedded in the price has dissipated, the pump price will not adjust for a while. At best, it may stay at $1.40 per liter even if crude oil continues to fall.

Sticky-down may be more of an issue for goods and products that consumers cannot do without, and where price volatility can be exploited. In the case of petrol or gasoline, consumers are not likely to return from the pump without filling their vehicles because the price of fuel is a few cents higher than it should be. In addition, most consumers are well aware that global crude oil prices are quite volatile, and this volatility is exploited by pump-owners in keeping prices at higher levels.

RELATED TERMS
  1. Keynesian Economics

    An economic theory of total spending in the economy and its effects ...
  2. Sticky Wage Theory

    An economic hypothesis that the pay of employed workers tends ...
  3. Business Economics

    The study of the financial issues and challenges faced by corporations. ...
  4. Capital Intensive

    A business process or an industry that requires large amounts ...
  5. Consumer Price Index - CPI

    A measure that examines the weighted average of prices of a basket ...
  6. Macroeconomics

    The field of economics that studies the behavior of the aggregate ...
Related Articles
  1. Economics

    The Economics Of Labor Mobility

    Loosening labor restrictions has both good and bad effects for a country and its workers.
  2. Austrian School of Economics, von Hayek
    Economics

    The Austrian School Of Economics

    Investopedia explains: If you think economists are only concerned with numbers, check out the Austrian School, who are more like economic philosophers.
  3. thinkstock|istock
    Economics

    Understanding Supply-Side Economics

    Does the amount of goods and services produced set the pace for economic growth? Here are the arguments.
  4. Adam Smith is considered the founder of modern economics.
    Economics

    Adam Smith: The Father Of Economics

    This free thinker promoted free trade at a time when governments controlled most commercial interests.
  5. Fundamental Analysis

    Spotting Profitability With ROCE

    This straightforward ratio measures whether a company is efficient, money-making or neither.
  6. Economics

    The Uncertainty Of Economics: Exploring The Dismal Science

    Learning about the study of economics can help you understand why you face contradictions in the market.
  7. Economics

    A Practical Look At Microeconomics

    Learn how individual decision-making turns the gears of our economy.
  8. Fundamental Analysis

    Hamburger Economics: The Big Mac Index

    In theory, PPP stands up much better than it does in reality. Find out how to evaluate currencies according to the price of a Big Mac.
  9. Budgeting

    The Economics Of Pet Ownership

    Before you bring a furry friend into your household, make sure you can handle the hefty financial commitment.
  10. Bonds & Fixed Income

    Can Keynesian Economics Reduce Boom-Bust Cycles?

    Learn about a British economist's proposed solution to a common economic problem.

You May Also Like

Hot Definitions
  1. Santa Claus Rally

    A surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations ...
  2. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  3. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  4. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  5. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  6. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
Trading Center