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A Single Espresso, Please! Rationalizing Espresso Price Dispersion Across Italian Cities

Author

Listed:
  • Flavio Delbono

    (University of Bologna)

  • Gemma Dipoppa

    (University of Pennsylvania)

  • Luca Lambertini

    (University of Bologna)

  • Carlo Reggiani

    (University of Manchester)

Abstract

This paper aims at providing an explanation of the observed espresso price dispersion across major Italian cities. We present some preliminary empirical evidence that suggests a positive relationships between the average espresso price in a city and the number of coffee shops (normalized for the adult population) operating in that city. The finding is shown to be robust after controlling for GDP per capita and consumers’ price index. We provide an interpretation of the empirical findings relying on a model of price competition where firms adjust the mark-up to offset the negative effect of any increase in their number.

Suggested Citation

  • Flavio Delbono & Gemma Dipoppa & Luca Lambertini & Carlo Reggiani, 2017. "A Single Espresso, Please! Rationalizing Espresso Price Dispersion Across Italian Cities," Journal of Industry, Competition and Trade, Springer, vol. 17(4), pages 465-478, December.
    • Handle: RePEc:kap:jincot:v:17:y:2017:i:4:d:10.1007_s10842-017-0246-3
    DOI: 10.1007/s10842-017-0246-3
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    1. Crucini, Mario J. & Yilmazkuday, Hakan, 2014. "Understanding long-run price dispersion," Journal of Monetary Economics, Elsevier, vol. 66(C), pages 226-240.

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    More about this item

    Keywords

    Price dispersion; Espresso prices; Market competition;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco

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