HBS Pricing Lab

We study firm-level pricing decisions and capabilities to understand their micro and macroeconomic impacts.
Our lab collaborates with companies who share access to their proprietary datasets to obtain insights
on firm performance and the broader economic environment.
We are part of the Digital Data Design Institute at Harvard.

Current Projects

Cost-Passthrough and Retail Markups

Santiago Alvarez-Blaser, Alberto Cavallo, Alex Mackay and Paolo Mengano

Retail Price Discounts and the
Post-Pandemic Inflation Surge:
Evidence from Online Micro Data

Alberto Cavallo and Oleksiy Kryvtsov

Detecting Turning Points in Inflation:
A Structural Breaks Approach

Alberto Cavallo and Gaston Garcia Zavaleta

Our Team

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Alberto Cavallo

Founder & Principal Investigator

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Alexander MacKay

Founder & Principal Investigator

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Paolo Mengano

Post-Doctoral Fellow

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Michael Sullivan

Post-Doctoral Fellow

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Santiago Alvarez-Blaser

Collaborator

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Tomas Pacheco

Pre-doc Research Assistant

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Gaston Garcia-Zavaleta

Post-Doctoral Fellow

 Peter Nicolajsen

Research Manager

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  Large Shocks Travel Fast
  Alberto Cavallo, Francesco Lippi and Ken Miyahara
  
  We leverage the inflation upswing of 2022 and various granular datasets to identify robust price-setting patterns following a large supply shock. We show that the frequency of price changes increases dramatically after a large shock. We set up a parsimonious New Keynesian model and calibrate it to fit the steady-state data before the shock. The model features a significant component of state-dependent decisions, implying that large cost shocks incite firms to react more swiftly than usual, resulting in a rapid pass-through to prices–large shocks travel fast. Understanding this feature is crucial for interpreting recent inflation dynamics….
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  Consumer Inertia and Market Power
  Alexander MacKay and Marc Remer
  
  We provide an empirical model to estimate the dynamic pricing incentives generated by consumer inertia (habit formation, search, brand loyalty, and switching costs). We show that these dynamic incentives can limit price increases after a merger, compared to the predictions from a static model….
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  Dynamic Pricing and Demand Volatility: Evidence from Restaurant Food Delivery
  Alexander MacKay, Dennis Svartbäck and Anders G. Ekholm
  
  We study the staggered adoption of a dynamic pricing algorithm. We find that high-frequency pricing led to lower prices and lower demand volatility. Our findings indicate that consumers strategically time their purchases, and we highlight how firms can benefit from this strategic behavior through dynamic pricing that results in lower costs….