Why Does the 'Law of One Price' Fail? A Case Study
AbstractWe use retail transaction prices for a multinational retailer to examine the extent and permanence of violations of the law of one price (LOOP) for identical products sold in a variety of countries. We find median deviations of twenty to fifty percent. The differences are not systematic across very similar goods within a product group (e.g. two types of mirrors), nor across product groups, ruling out differences in local distribution costs as an explanation of violations of the LOOP, and pointing instead to differences in mark-ups. While divergences are large at a point in time, both their extent and their duration is limited, suggesting the presence of significant indirect competitive pressures.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2187.
Date of creation: Jul 1999
Date of revision:
Contact details of provider:
Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
Find related papers by JEL classification:
- D40 - Microeconomics - - Market Structure and Pricing - - - General
- E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
- L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Haroon Mumtaz & Jean Imbs & Morten O. Ravn & Helene Rey, 2003. "PPP Strikes Back," IMF Working Papers 03/68, International Monetary Fund.
- Imbs, Jean & Mumtaz, Haroon & Ravn, Morten O. & Rey, Hélène, 2003.
"PPP Strikes Back: Aggregation and the Real Exchange Rate,"
CEPR Discussion Papers
3715, C.E.P.R. Discussion Papers.
- Jean Imbs & Haroon Mumtaz & Morten Ravn & Hélène Rey, 2005. "PPP Strikes Back: Aggregation and the Real Exchange Rate," The Quarterly Journal of Economics, MIT Press, vol. 120(1), pages 1-43, January.
- Jean Imbs & Haroon Mumtaz & Morton O. Ravn & Helene Rey, 2002. "PPP Strikes Back: Aggregation and the Real Exchange Rate," NBER Working Papers 9372, National Bureau of Economic Research, Inc.
- Jean Imbs & Haroon Mumtaz & Morten O. Ravn & Helene Rey, 2003. "PPP Strikes Back: Aggregation and the Real Exchange Rate," IEHAS Discussion Papers 0307, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
- Jean Imbs & Haroon Mumtaz & Morten O. Ravn & Hélène Rey, 2009.
"One TV, One Price?,"
NBER Working Papers
15418, National Bureau of Economic Research, Inc.
- Michael B. Devereux & Charles Engel & Cedric Tille, 1999.
"Exchange Rate Pass-Through and the Welfare Effects of the Euro,"
NBER Working Papers
7382, National Bureau of Economic Research, Inc.
- Michael B. Devereux & Charles Engel & CÈdric Tille, 2003. "Exchange Rate Pass-Through and the Welfare Effects of the Euro," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(1), pages 223-242, February.
- Michael Devereux & Charles Engel & Cedric Tille, 1999. "Exchange-Rate Pass-Through and the Welfare Effects of the Euro," Discussion Papers in Economics at the University of Washington 0034, Department of Economics at the University of Washington.
- Michael Devereux & Charles Engel & Cedric Tille, 1999. "Exchange-Rate Pass-Through and the Welfare Effects of the Euro," Working Papers 0034, University of Washington, Department of Economics.
- Joanna Wolszczak-Derlacz, 2008. "Price convergence in the EU—an aggregate and disaggregate approach," International Economics and Economic Policy, Springer, vol. 5(1), pages 25-47, July.
- Matthias Lutz, 2002. "Beyond Burgernomics and MacParity: Exchange Rate Forecasts Based on the Law of One Price," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 D4-1, International Conferences on Panel Data.
- Mario J. Crucini & Chris I. Telmer & Marios Zachariadis, 2001.
"Understanding European Real Exchange Rates,"
Vanderbilt University Department of Economics Working Papers
0120, Vanderbilt University Department of Economics.
- Willem H. Buiter, 2000.
"Optimal currency areas: why does the exchange rate regime matter? (with an application to UK membership in EMU),"
LSE Research Online Documents on Economics
20178, London School of Economics and Political Science, LSE Library.
- W.H. Buiter, 2000. "Optimal Currency Areas: Why Does the Exchange Rate Regime Matter? (With an Application to UK Membership in EMU)," CEP Discussion Papers dp0462, Centre for Economic Performance, LSE.
- Steven Silver, 2010. "Convergence in Revealed Preferences for Automobiles as Differentiated Goods: U.S. and OECD Countries: 1970–1999," Atlantic Economic Journal, International Atlantic Economic Society, vol. 38(1), pages 3-14, March.
- Nikolay Nenovsky & Kalina Dimitrova, 2002. "Dual Inflation Under the Currency Board: The Challenges of Bulgarian EU Accession," William Davidson Institute Working Papers Series 487, William Davidson Institute at the University of Michigan.
- Buiter, Willem H, 2000. "Optimal Currency Areas: Why Does The Exchange Rate Regime Matter?," CEPR Discussion Papers 2366, C.E.P.R. Discussion Papers.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.