This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Existence and Persistence of Price Dispersion: an Empirical Analysis

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Saul Lach

Additional information is available for the following registered author(s):

Abstract

Using 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.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help file. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.nber.org/papers/w8737.pdf
File Format: application/pdf
File Function:
Download Restriction: Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html.

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.

Publisher Info
Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8737.

Download reference. The following formats are available: HTML, plain text, BibTeX, RIS (EndNote), ReDIF
Length:
Date of creation: Jan 2002
Date of revision:
Publication status: published as Lach, Saul. "Existence And Persistence Of Price Dispersion: An Empirical Analysis," Review of Economics and Statistics, 2002, v84(3,Aug), 433-444.
Handle: RePEc:nbr:nberwo:8737

Note: IO PR
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: ().

Related research
Keywords:

Other versions of this item:

Find related papers by JEL classification:
L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Rothschild, Michael, 1974. "Searching for the Lowest Price When the Distribution of Prices Is Unknown," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 689-711, July/Aug.. [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. Burdett, Kenneth & Judd, Kenneth L, 1983. "Equilibrium Price Dispersion," Econometrica, Econometric Society, vol. 51(4), pages 955-69, July. [Downloadable!] (restricted)
  4. Danny Quah, 1992. "Empirical cross-section dynamics in economic growth," Discussion Paper / Institute for Empirical Macroeconomics 75, Federal Reserve Bank of Minneapolis. [Downloadable!]
    Other versions:
  5. Lach, Saul & Tsiddon, Daniel, 1992. "The Behavior of Prices and Inflation: An Empirical Analysis of Disaggregated Price Data," Journal of Political Economy, University of Chicago Press, vol. 100(2), pages 349-89, April. [Downloadable!] (restricted)
  6. 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)
    Other versions:
  7. Rajiv Lal & Carmen Matutes, 1989. "Price Competition in Multimarket Duopolies," RAND Journal of Economics, The RAND Corporation, vol. 20(4), pages 516-537, Winter. [Downloadable!] (restricted)
  8. Varian, Hal R, 1980. "A Model of Sales," American Economic Review, American Economic Association, vol. 70(4), pages 651-59, September. [Downloadable!] (restricted)
  9. Saul Lach & Daniel Tsiddon, 1994. "Staggering and Synchronization in Price-Setting: Evidence from Multipro-duct Firms," NBER Working Papers 4759, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  10. McAfee R. Preston, 1995. "Multiproduct Equilibrium Price Dispersion," Journal of Economic Theory, Elsevier, vol. 67(1), pages 83-105, October. [Downloadable!] (restricted)
  11. John McMillan & Peter B. Morgan, 1988. "Price Dispersion, Price Flexibility, and Repeated Purchasing," Canadian Journal of Economics, Canadian Economics Association, vol. 21(4), pages 883-902, November. [Downloadable!] (restricted)
  12. Rob, Rafael, 1985. "Equilibrium Price Distributions," Review of Economic Studies, Blackwell Publishing, vol. 52(3), pages 487-504, July. [Downloadable!] (restricted)
  13. J. Rupert Gatti, 2000. "Equilibrium Price Dispersion with Sequential Search," Econometric Society World Congress 2000 Contributed Papers 1368, Econometric Society. [Downloadable!]
  14. Geweke, John & Marshall, Robert C & Zarkin, Gary A, 1986. "Mobility Indices in Continuous Time Markov Chains," Econometrica, Econometric Society, vol. 54(6), pages 1407-23, November. [Downloadable!] (restricted)
  15. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June. [Downloadable!] (restricted)
  16. Butters, Gerard R, 1977. "Equilibrium Distributions of Sales and Advertising Prices," Review of Economic Studies, Blackwell Publishing, vol. 44(3), pages 465-91, October. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. José Luis Moraga-González & Matthijs R. Wildenbeest, 2006. "Maximum Likelihood Estimation of Search Costs," Tinbergen Institute Discussion Papers 06-019/1, Tinbergen Institute. [Downloadable!]
    Other versions:
  2. David R. Bell & Christian A.L. Hilber, 2004. "An Empirical Test of the Theory of Sales: Do Household Storage Costs Affect Consumer and Store Behavior?," Working Papers 05-23, Utrecht School of Economics. [Downloadable!]
  3. Michael Beenstock & Daniel Felsenstein, 2003. "Decomposing the Dynamics of Regional Earnings Disparities in Israel," ERSA conference papers ersa03p90, European Regional Science Association. [Downloadable!]
  4. Lach, Saul, 2005. "Immigration and Prices," CEPR Discussion Papers 5083, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  5. Michael R. Baye & John Morgan & Patrick Scholten, 2004. "Temporal Price Dispersion: Evidence from an Online Consumer Electronics Market," Working Papers 2004-04, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy. [Downloadable!]
  6. Simon P. Anderson & André de Palma, 2003. "Price Dispersion," Virginia Economics Online Papers 361, University of Virginia, Department of Economics. [Downloadable!]
  7. Joaquín Alegre & Maria Sard, 2006. "Tour operators' price strategie in the Balearic Islands," DEA Working Papers 19, Universitat de les Illes Balears, Departament d'Economía Aplicada. [Downloadable!]
  8. George Alessandria, 2005. "Consumer search, price dispersion, and international relative price volatility," Working Papers 05-9, Federal Reserve Bank of Philadelphia. [Downloadable!]
  9. Chad Syverson, 2006. "Prices, Spatial Competition, and Heterogenous Producers: An Empirical Test," NBER Working Papers 12231, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  10. Konstantin Gluschenko, 2004. "The Law of one Price in the Russian Economy," LICOS Discussion Papers 15204, LICOS - Centre for Institutions and Economic Performance, K.U.Leuven. [Downloadable!]
  11. Salvador Gil-Pareja & Simón Sosvilla-Rivero, 2004. "Export market integration in the European Union," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 271-301, November. [Downloadable!]
    Other versions:
  12. Maarten C.W. Janssen & José Luis Moraga-González, 2007. "On Mergers in Consumer Search Markets," Tinbergen Institute Discussion Papers 07-054/1, Tinbergen Institute. [Downloadable!]
  13. Yuriy Gorodnichenko, 2007. "Using Firm Optimization to Evaluate and Estimate Returns to Scale," NBER Working Papers 13666, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  14. José Luis Moraga-González & Zsolt Sándor & Matthijs R. Wildenbeest, 2008. "Nonparametric Estimation of the Costs of Non-Sequential Search," Tinbergen Institute Discussion Papers 07-102/1, Tinbergen Institute. [Downloadable!]
    Other versions:
  15. Cason, T. & Friedman, D. & Wagener, F.O.O., 2003. "The dynamics of price dispersion, or Edgeworth variations," CeNDEF Working Papers 03-11, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance. [Downloadable!]
    Other versions:
  16. Allen Head & Alok Kumar & Beverly Lapham, 2006. "Market Power, Price Adjustment, and Inflation," Working Papers 1089, Queen's University, Department of Economics. [Downloadable!]
  17. Sebnem Bahadir-Lust & Jens-Peter Loy & Christoph R. Weiss, 2007. "Are they always offering the lowest price? An empirical analysis of the persistence of price dispersion in a low inflation environment," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(7), pages 777-788. [Downloadable!]
  18. Eyal Baharad & Benjamin Eden, 2003. "Price Rigidity and Price Dispersion: Evidence from Micro Data," Working Papers 0321, Department of Economics, Vanderbilt University. [Downloadable!]
    Other versions:
  19. Jürgen Bracht & Saul Lach & Eyal Winter, 2002. "Modeling Oligopolistic Price Adjustment in Micro Level Panel Data," CIG Working Papers FS IV 02-24, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG). [Downloadable!]
  20. Alfredo Martín-Oliver & Vicente Salas-Fumás & Jesús Saurina, 2005. "Interest rate dispersion in deposit and loan markets," Banco de España Working Papers 0506, Banco de España. [Downloadable!]
Statistics
Access and download statistics

Did you know? Citation analysis on IDEAS includes online papers that are freely accessible and whose text could be automatically analyzed, currently about 150000 papers.

This page was last updated on 2008-8-19.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.