Price-setting behavior of Austrian firms

This paper explores nominal rigidities by investigating price-setting behavior of Austrian firms based on survey evidence. Distinguishing between two stages of price setting-first the price reviewing phase and second the price changing phase-our results suggest that the main obstacles to price flexibility lie on the second stage. Our main result is that firms postpone price adjustments, because they are afraid to antagonize customers with frequent price changes. Thus, customer relationships - especially those with consumers-are a major source of price stickiness in the Austrian economy. © Springer Science+Business Media, BV 2007.