Baxter, Marianne2021-04-302021-04-302020-06Marianne Baxter. "New Low Price! An Analysis of IKEA Pricing."https://hdl.handle.net/2144/42446IKEA is a multinational retailer of home furnishings. The dominant feature of IKEA advertising and market image is a reputation for low prices. IKEA's iconic catalog is the company's primary advertising device, representing 70% of IKEA's annual advertising budget. The catalog contains photos, prices, and written descriptions of items, with prices denominated in the customer's currency. IKEA prices are famous for remaining unchanged for the life of the catalog year. The IKEA data are free of two major problems that arise in other micro-pricing studies: product substitution and temporary sales. This paper analyzes IKEA catalog price data for Germany, France, Italy, Sweden, UK, US and Canada. We nd a substantial proportion of small price changes, as is common in micro price datasets, but we nd that small price changes are overwhelmingly associated with the practice of \charm pricing"{adjusting ending digits to end in the numeral \9", with price changes less than one currency unit. Both intensive and extensive margins are important contributors to overall IKEA catalog price changes, in contrast to the prior literature which nds that only the intensive margin is important. We nd near-zero pass-through of exchange rates to IKEA prices but approximately 100% pass-through of local prices, which is consistent with the illustrative model that we present that predicts this pattern for goods with a high component of local distribution costs. Our most novel results concern price coordination. IKEA price changes show low coordination across countries, even among countries in the Euro Zone. For example, prices for identical goods are no more likely to move together between Germany and France than between Sweden and Canada. We nd evidence of signi cant price coordination with goods belonging to a product family such as the \BILLY" bookcases. However, the price coordination exists only within countries and not across countries. These facts suggest that there may be economies of scope in price setting as suggested by Midrigan (2011), but that these economies operate at the family level of goods and do not operate across countries.en-USAttribution-NonCommercial-NoDerivatives 4.0 Internationalhttp://creativecommons.org/licenses/by-nc-nd/4.0/Article424782