Asymmetric Price Adjustment in the Small: An Implication of Rational Inattention

Analyzing scanner price data that cover 27 product categories over an eight-year period from a large Mid-western supermarket chain, we uncover a surprising regularity in the data - small price increases occur more frequently than small price decreases. We find that this asymmetry holds for price changes of up to about 10 cents, on average. The asymmetry disappears for larger price changes. We document this finding for the entire data set, as …