What are Sticky Prices?

Definition: Sticky Prices


Oil prices are falling (hooray) but other products aren't following suit. The high cost of groceries and other personal necessities like toothpaste are still in tact even though the initial hike was blamed on oil. Steady prices that exist without the explanatory rationale are called sticky prices. Competitive juices are needed to get these sticky prices to budge. Lars Perner of the University of Southern California's Marshall School of Business explains, "As soon as the first [company] in a category reduces prices, the others will follow suit. But they're all hoping the other one doesn't."

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