Sticky-Down

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.



comments powered by Disqus
Hot Definitions
  1. Benchmark Bond

    A bond that provides a standard against which the performance of other bonds can be measured. Government bonds are almost always used as benchmark bonds. Also referred to as "benchmark issue" or "bellwether issue".
  2. Market Capitalization

    The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying a company's shares outstanding by the current market price of one share. The investment community uses this figure to determine a company's size, as opposed to sales or total asset figures.
  3. Oil Reserves

    An estimate of the amount of crude oil located in a particular economic region. Oil reserves must have the potential of being extracted under current technological constraints. For example, if oil pools are located at unattainable depths, they would not be considered part of the nation's reserves.
  4. Joint Venture - JV

    A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task. This task can be a new project or any other business activity. In a joint venture (JV), each of the participants is responsible for profits, losses and costs associated with it.
  5. Aggregate Risk

    The exposure of a bank, financial institution, or any type of major investor to foreign exchange contracts - both spot and forward - from a single counterparty or client. Aggregate risk in forex may also be defined as the total exposure of an entity to changes or fluctuations in currency rates.
  6. Organic Growth

    The growth rate that a company can achieve by increasing output and enhancing sales. This excludes any profits or growth acquired from takeovers, acquisitions or mergers. Takeovers, acquisitions and mergers do not bring about profits generated within the company, and are therefore not considered organic.
Trading Center