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Inflation, Price Dispersion, and Market Structure

Author

Listed:
  • Mustafa Caglayan

    (Department of Economics, University of Glasgow)

  • Alpay Filiztekin

    (Faculty of Arts and Social Sciences, Sabanci University)

  • Michael T. Rauh

    (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)

Abstract

In this paper, we use a unique micro-level data set from Istanbul to investigate the empirical relationship between inflation and price dispersion. In particular, our data set includes price observations from three distinct store types: bakkals (convenience stores), pazars (bazaars), and supermarkets. Our findings indicate that pazars exhibit the least amount of price dispersion on average, which is consistent with the fact that menu and search costs are very low in the pazar and that such sellers seem to have very little market power. Moreover, we find that several of the basic inflation-dispersion channels identified by the theoretical literature seem to be operating in our data.

Suggested Citation

  • Mustafa Caglayan & Alpay Filiztekin & Michael T. Rauh, 2006. "Inflation, Price Dispersion, and Market Structure," Working Papers 2006-03, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    • Handle: RePEc:iuk:wpaper:2006-03
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    References listed on IDEAS

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    More about this item

    Keywords

    inflation; market structure; menu cost models; micro panel data; price dispersion;
    All these keywords.

    JEL classification:

    • L0 - Industrial Organization - - General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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