This paper contributes to recent research on price dynamics using micro-price data
sets. We emphasize a previously neglected aspect, the role of retailer heterogeneity.
Our key findings are: (i) the frequency of price adjustment and the implied duration of
prices varies considerably across retailers; (ii) price promotions (sales) also vary
across retailers with some retailers seldom using sales, while for others sales are a
common feature of pricing; (iii) the duration of reference prices is-at most-26 weeks
but the duration of reference prices is around 16 weeks for some retailers; (iv)
branded products have shorter durations than private label products; (v)
decomposition analysis suggests price adjustment is evenly split between sales and
reference prices but, for some retailers, reference prices are the main source of price
changes; (vi) there is low correlation between the frequency of price and costs
changes across both products and retailers. Taken together, while confirming the
significance of price stickiness after accounting for sales, price dynamics vary
considerably across retailers. In turn, retailer heterogeneity has important implications
for interpreting aggregate price dynamics in both theoretical and empirical research.

In this paper we study equilibrium and experimental bidding behaviour in first-price and second-price auctions with outside options. We find that bidders do respond to outside options and to variations of common knowledge about competitors' outside options. However, overbidding in first-price auctions is significantly higher with outside options than without. First-price auctions yield more revenue than second-price auctions. This revenue-premium is significantly higher with outside options. In second-price auctions the introduction of outside options has only a small effect. © 2008 Elsevier B.V. All rights reserved.