Search Results
Discussion Paper
How Do Firms Adjust Prices in a High Inflation Environment?
How do firms set prices? What factors do they consider, and to what extent are cost increases passed through to prices? While these are important questions in general, they become even more salient during periods of high inflation. In this blog post, we highlight preliminary results from ongoing research on firms’ price-setting behavior, a joint project between researchers at the Federal Reserve Banks of Atlanta, Cleveland, and New York. We use a combination of open-ended interviews and a quantitative survey in our analysis. Firms reported that the strength of demand was the most important ...
Newsletter
The Psychology of Free: How a Price of Zero Influences Decisionmaking
Explore the psychological factors behind the power of “free,” including decision-making, social norms, and zero-price effect.
Journal Article
Subjective Assessment of Managerial Performance and Decisionmaking in Banking
We examine subjective supervisory assessments of managerial performance in the banking industry. Results of empirical tests show that better assessments are (i) positively associated with decisions made by examiners to upgrade relatively objective bank performance ratings; (ii) negatively associated with decisions made by examiners to downgrade relatively objective bank performance ratings; and (iii) positively associated with decisions made by bank holding company managers to distribute resources among subsidiary banks. These results are consistent with the finding that soft information ...
Working Paper
Is There a Puzzle in Underwater Mortgage Default?
A recurring question in the mortgage default literature is why underwater default is rare relative to model predictions. We find that one answer is miscalibration of flow payoffs. We build a novel, detailed quantitative model of mortgage default and find that realistic rent dynamics plus mild levels of default costs are sufficient to eliminate negative-equity strategic default. We present further empirical results supporting our model’s focus on flow payoffs. Our model addresses the underwater mortgage default puzzle, offers more realistic interpretations of policy consequences, and ...