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What affects intranational price dispersion?: The case of Japanese gasoline prices

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  • Tsuruta, Yoshitaka
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    Abstract

    The empirical analysis on price dispersion, as described by [Engel, C., Rogers, J.H., 1996. How wide is the Border? American Economic Review 86, 1112-1125], is to investigate the determinants of international relative price fluctuations. Using data from the Japanese gasoline industry, we investigate the implications of the market structure for intranational price dispersion. Our empirical results suggest that: (1) in conformity with the double marginalization model, the dispersion of the wholesale gasoline price is affected by the relative retailer's margin and (2) the dispersion of the retail gasoline margin is influenced by the degree of competition and advertising. Considering these results synthetically, the retail price dispersion is amplified by the retail market structure both directly and indirectly.

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    Bibliographic Info

    Article provided by Elsevier in its journal Japan and the World Economy.

    Volume (Year): 20 (2008)
    Issue (Month): 4 (December)
    Pages: 563-584

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    Handle: RePEc:eee:japwor:v:20:y:2008:i:4:p:563-584

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    Web page: http://www.elsevier.com/locate/inca/505557

    Related research

    Keywords: Law of one price Price dispersion Double marginalization Market structure;

    References

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    1. David C. Parsley & Shang-Jin Wei, 2000. "Explaining the Border Effect: The Role of Exchange Rate Variability, Shipping Costs, and Geography," NBER Working Papers 7836, National Bureau of Economic Research, Inc.
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    12. Daniel Berkowitz & David DeJong, 1998. "Russia's Internal Border," William Davidson Institute Working Papers Series 189, William Davidson Institute at the University of Michigan.
    13. Mitra, Anusree & Lynch, John G, Jr, 1995. " Toward a Reconciliation of Market Power and Information Theories of Advertising Effects on Price Elasticity," Journal of Consumer Research, University of Chicago Press, vol. 21(4), pages 644-59, March.
    14. Mahbub Morshed, A. K. M., 2003. "What can we learn from a large border effect in developing countries?," Journal of Development Economics, Elsevier, vol. 72(1), pages 353-369, October.
    15. Varian, Hal R, 1980. "A Model of Sales," American Economic Review, American Economic Association, vol. 70(4), pages 651-59, September.
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    Cited by:
    1. Juan Luis Jiménez & Jordi Perdiguero, 2011. "Does Rigidity of Prices Hide Collusion?," IREA Working Papers 201120, University of Barcelona, Research Institute of Applied Economics, revised Oct 2011.

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