Price Setting Behaviour in Lesotho: Stylised Facts from Consumer Retail Prices

Abstract: 
This paper by Edwards and Nchake (2013) documents some of the main features of price setting behaviour by retail outlets – i.e. the frequency of price changes, the average size of price changes and the probability of price changes – in Lesotho over 2002-2009, using a sample of 229 product items for 345 retail outlets. The authors identify some of the dynamic features of price changes, including the synchronization of price changes and the relationship between the frequency and size of price changes and the persistence of existing prices. Finally, the paper compares the stylised facts on price setting behaviour in Lesotho to other countries and South Africa in particular. Surprisingly, the frequency and size of price changes in Lesotho differ substantially from those in South Africa, despite the presence of common retail chains and their joint membership in a customs union and common monetary area.