{
  "title": "Beyond Costs: The Dominant Role of Strategic Complementarities in Pricing",
  "publication": "IMF Working Papers, August 15, 2025",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2025/08/15/beyond-costs-the-dominant-role-of-strategic-complementarities-in-pricing-569543",
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  "summary": "This paper documents five empirical facts about the role of strategic complementarities in firms’ price-setting behavior, using administrative data from Chilean firms. (1) Strategic complementarities play a dominant role in price setting, exerting a stronger influence than changes in marginal costs.",
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      "heading": "Overview",
      "content": "- Paper documents five empirical facts about the role of strategic complementarities in firms’ price-setting behavior using administrative data from Chilean firms.\n- Authors: Elías Albagli, Francesco Grigoli, Emiliano Luttini, Dagoberto Quevedo, Marco Rojas\n- Date: August 15, 2025"
    },
    {
      "heading": "Key empirical findings",
      "content": "- (1) Strategic complementarities play a dominant role in price setting, exerting a stronger influence than changes in marginal costs.\n- (2) While the strength of strategic complementarities varies across sectors, they consistently outweigh the role of cost changes.\n- (3) In high-inflation environments, firms become more responsive to changes in the prices of their competitors.\n- (4) Firms respond more strongly to competitor price increases than to decreases, mirroring the rockets and feathers' phenomenon of costs.\n- (5) Strategic complementarities are stronger among firms with fewer competitors, larger market shares, and broader customer bases."
    },
    {
      "heading": "Implications and interpretation (as stated in the paper)",
      "content": "- These findings suggest that strategic complementarities—a source of real rigidities—are:\n  - sizable,\n  - state-dependent,\n  - asymmetric,\n  - and shaped by market structure.\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2025/08/15/beyond-costs-the-dominant-role-of-strategic-complementarities-in-pricing-569543"
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    "Authors: Elías Albagli, Francesco Grigoli, Emiliano Luttini, Dagoberto Quevedo, Marco Rojas",
    "Published: August 15, 2025",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9798229019194.001",
    "Paper documents five empirical facts about the role of strategic complementarities in firms’ price-setting behavior using administrative data from Chilean firms.",
    "Authors: Elías Albagli, Francesco Grigoli, Emiliano Luttini, Dagoberto Quevedo, Marco Rojas",
    "Date: August 15, 2025",
    "(1) Strategic complementarities play a dominant role in price setting, exerting a stronger influence than changes in marginal costs.",
    "(2) While the strength of strategic complementarities varies across sectors, they consistently outweigh the role of cost changes.",
    "(3) In high-inflation environments, firms become more responsive to changes in the prices of their competitors.",
    "(4) Firms respond more strongly to competitor price increases than to decreases, mirroring the `rockets and feathers' phenomenon of costs.",
    "(5) Strategic complementarities are stronger among firms with fewer competitors, larger market shares, and broader customer bases.",
    "These findings suggest that strategic complementarities—a source of real rigidities—are:",
    "**Working Paper**"
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