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Are they always offering the lowest price? An empirical analysis of the persistence of price dispersion in a low inflation environment

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Author Info
Sebnem Bahadir-Lust (Department of Economics, Vienna University of Economics and Business Administration, Vienna, Austria)
Jens-Peter Loy (Department of Agricultural Economics, University of Kiel, Kiel, Germany)
Christoph R. Weiss (Department of Economics, Vienna University of Economics and Business Administration, Vienna, Austria)
Abstract

We study the existence of price distributions and the intra-distribution dynamics for 10 food products across 131 retail stores in Germany for a time period of 43 weeks. Based upon Varian's (1980) model of sales, we aim at investigating whether the position of stores within the cross-sectional price distribution is persistent or changes over time (mixed-strategy equilibrium). Our results suggest a substantial degree of price dispersion even after controlling for unobserved store heterogeneity. Despite some intra-distribution dynamics, we find evidence for a persistence of stores in the cross-sectional price distribution over time. Copyright © 2007 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/mde.1376
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Publisher Info
Article provided by John Wiley & Sons, Ltd. in its journal Managerial and Decision Economics.

Volume (Year): 28 (2007)
Issue (Month): 7 ()
Pages: 777-788
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:wly:mgtdec:v:28:y:2007:i:7:p:777-788

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Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976

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  1. Walsh, Patrick Paul & Whelan, Ciara, 1999. "Modelling Price Dispersion as an Outcome of Competition in the Irish Grocery Market," Journal of Industrial Economics, Blackwell Publishing, vol. 47(3), pages 325-43, September. [Downloadable!] (restricted)
  2. Pratt, John W & Wise, David A & Zeckhauser, Richard, 1979. "Price Differences in Almost Competitive Markets," The Quarterly Journal of Economics, MIT Press, vol. 93(2), pages 189-211, May. [Downloadable!] (restricted)
  3. Taylor, John B., 1999. "Staggered price and wage setting in macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 15, pages 1009-1050 Elsevier. [Downloadable!] (restricted)
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  4. Burdett, Kenneth & Judd, Kenneth L, 1983. "Equilibrium Price Dispersion," Econometrica, Econometric Society, vol. 51(4), pages 955-69, July. [Downloadable!] (restricted)
  5. Steven Salop & Joseph Stiglitz, 1977. "Bargains and ripoffs: a model of monopolistically competitive price dispersion," Special Studies Papers 94, Board of Governors of the Federal Reserve System (U.S.).
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  6. Villas-Boas, J Miguel, 1995. "Models of Competitive Price Promotions: Some Empirical Evidence from the Coffee and Saltine Crackers Markets," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 4(1), pages 85-107, Spring.
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  8. Loy, J.P. & Weiss, C.R., 2002. "Staggering and Synchronisation of Prices in a Low Inflation Environment: Evidence from German Food Stores," 2002 International Congress, August 28-31, 2002, Zaragoza, Spain 24823, European Association of Agricultural Economists. [Downloadable!]
  9. Reinganum, Jennifer F, 1979. "A Simple Model of Equilibrium Price Dispersion," Journal of Political Economy, University of Chicago Press, vol. 87(4), pages 851-58, August. [Downloadable!] (restricted)
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  10. Varian, Hal R, 1980. "A Model of Sales," American Economic Review, American Economic Association, vol. 70(4), pages 651-59, September. [Downloadable!] (restricted)
  11. Braverman, Avishay, 1980. "Consumer Search and Alternative Market Equilibria," Review of Economic Studies, Blackwell Publishing, vol. 47(3), pages 487-502, April. [Downloadable!] (restricted)
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  13. George J. Stigler, 1961. "The Economics of Information," Journal of Political Economy, University of Chicago Press, vol. 69, pages 213. [Downloadable!] (restricted)
  14. Grether, David M & Schwartz, Alan & Wilde, Louis L, 1988. "Uncertainty and Shopping Behaviour: An Experimental Analysis," Review of Economic Studies, Blackwell Publishing, vol. 55(2), pages 323-42, April. [Downloadable!] (restricted)
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  15. Alan T. Sorensen, 2000. "Equilibrium Price Dispersion in Retail Markets for Prescription Drugs," Journal of Political Economy, University of Chicago Press, vol. 108(4), pages 833-862, August. [Downloadable!] (restricted)
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