Uncertainty and Firm Price Setting

Author Name MORIKAWA Masayuki (President and CRO, RIETI)
Creation Date/NO. May 2023 23-J-019
Download / Links


This study presents observations on firms’ sale price and purchase price uncertainty using order-made aggregate data from the Short-Term Economic Survey of Enterprises in Japan (Bank of Japan). The results show that, first, sale and purchase price uncertainty increased markedly in the second half of 2008, when the global financial crisis hit, after a surge in resource and energy prices, but subsequently remained relatively stable and remained low even during the COVID-19 crisis. Second, sales price uncertainty is strongly associated with purchase price uncertainty, and the relationship is more pronounced than its relationship with demand uncertainty. Third, purchase price uncertainty suppresses firms’ sales prices.

The English version of this paper is 23-E-040.