Price Dispersion in U.S. Manufacturing
AbstractThis paper addresses the question of whether products in the U.S. Manufacturing sector sell at a single (common) price, or whether prices vary across producers. The question of price dispersion is important for two reasons. First, if prices vary across producers, the standard method of using industry price deflators leads to errors in measuring real output at the firm or establishment level. These errors in turn lead to biased estimates of the production function and productivity growth equation as shown in Abbott (1988). Second, if prices vary across producers, it suggests that producers do not take prices as given but use price as a competitive variable. This has several implications for how economists model competitive behavior.
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Bibliographic InfoPaper provided by Center for Economic Studies, U.S. Census Bureau in its series Working Papers with number 89-7.
Date of creation: Oct 1989
Date of revision:
CES; economic; research; micro; data; microdata; chief; economist;
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