Competitor's price changes drive firms' pricing decisions, impacting market dynamics.
The article discusses how firms in Japan make pricing decisions based on what their competitors are doing. When prices go down, firms are more likely to follow suit. Companies with a bigger market share are less affected by competitors' price changes. Higher inflation expectations lead to price increases. Firms facing uncertainty tend to delay changing prices. The researchers used data from surveys to study these patterns and linked their findings to a theoretical model.