Existence and Persistence of Price Dispersion: an Empirical Analysis
AbstractUsing a unique data set on store-level monthly prices of four homogenous products sold in Israel, I study the existence and characteristics of the dispersion of prices across stores, as well as its persistence over time. I find that price dispersion prevails even after controlling for observed and unobserved product heterogeneity. Moreover, intra-distribution mobility is significant: stores move up and down the cross-sectional price distribution. Thus, consumers cannot learn about stores that consistently post low prices. As a consequence, price dispersion does not disappear and persists over time as predicted by Varian's (1980) model of sales.
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Date of creation: Jan 2002
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- Saul Lach, 2002. "Existence And Persistence Of Price Dispersion: An Empirical Analysis," The Review of Economics and Statistics, MIT Press, vol. 84(3), pages 433-444, August.
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
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- NEP-ALL-2002-02-10 (All new papers)
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