Advanced Search
MyIDEAS: Login to save this paper or follow this series

The Morphology of Price Dispersion

Contents:

Author Info

  • Greg Kaplan

    ()
    (Department of Economics, Princeton University)

  • Guido Menzio

    ()
    (Department of Economics, University of Pennsylvania)

Abstract

This paper is a study of the shape and structure of the distribution of prices at which an identical good is sold in a given market and time period. We find that the typical price distribution is symmetric and leptokurtic, with a standard deviation between 19% and 36%. Only 10% of the variance of prices is due to variation in the expensiveness of the stores at which a good is sold, while the remaining 90% is due, in approximately equal parts, to differences in the average price of a good across equally expensive stores and to differences in the price of a good across transactions at the same store. We show that the distribution of prices that households pay for the same bundle of goods is approximately Normal, with a standard deviation between 9% and 14%. Half of this dispersion is due to differences in the expensiveness of the stores where households shop, while the other half is mostly due to differences in households’ choices of which goods to purchase at which stores. We find that households with fewer employed members pay lower prices, and do so by visiting a larger number of stores, rather than by shopping more frequently.

Download Info

If 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.
File URL: http://economics.sas.upenn.edu/system/files/14-002.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Penn Institute for Economic Research, Department of Economics, University of Pennsylvania in its series PIER Working Paper Archive with number 14-002.

as in new window
Length: 60 pages
Date of creation: 27 Jan 2014
Date of revision:
Handle: RePEc:pen:papers:14-002

Contact details of provider:
Postal: 3718 Locust Walk, Philadelphia, PA 19104
Phone: 215-898-9992
Fax: 215-573-2378
Email:
Web page: http://economics.sas.upenn.edu/pier
More information through EDIRC

Related research

Keywords: Price dispersion; product market search; amenities; employment;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

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.:
as in new window
  1. James Albrecht & Fabien Postel‐Vinay & Susan Vroman, 2013. "An Equilibrium Search Model Of Synchronized Sales," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54(2), pages 473-493, 05.
  2. Mikhail Golosov & Robert E. Lucas Jr., 2007. "Menu Costs and Phillips Curves," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 115, pages 171-199.
  3. Susan E. Woodward & Robert E. Hall, 2010. "Diagnosing Consumer Confusion and Sub-Optimal Shopping Effort: Theory and Mortgage-Market Evidence," NBER Working Papers 16007, National Bureau of Economic Research, Inc.
  4. Manolis Galenianos & Rosalie Liccardo Pacula & Nicola Persico, 2009. "A Search-Theoretic Model of the Retail Market for Illicit Drugs," NBER Working Papers 14980, National Bureau of Economic Research, Inc.
  5. Moraga-González, José Luis & Wildenbeest, Matthijs R., 2008. "Maximum likelihood estimation of search costs," European Economic Review, Elsevier, Elsevier, vol. 52(5), pages 820-848, July.
  6. Alan T. Sorensen, 2000. "Equilibrium Price Dispersion in Retail Markets for Prescription Drugs," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 108(4), pages 833-862, August.
  7. Greg Kaplan & Guido Menzio, 2013. "Shopping Externalities and Self-Fulfilling Unemployment Fluctuations," Working Papers, Princeton University, Department of Economics, Center for Economic Policy Studies. 1461, Princeton University, Department of Economics, Center for Economic Policy Studies..
  8. Burdett, Kenneth & Judd, Kenneth L, 1983. "Equilibrium Price Dispersion," Econometrica, Econometric Society, Econometric Society, vol. 51(4), pages 955-69, July.
  9. Mark Aguiar & Erik Hurst, 2005. "Consumption versus Expenditure," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 113(5), pages 919-948, October.
  10. Varian, Hal R, 1980. "A Model of Sales," American Economic Review, American Economic Association, American Economic Association, vol. 70(4), pages 651-59, September.
  11. Liran Einav & Ephraim Leibtag & Aviv Nevo, 2010. "Recording discrepancies in Nielsen Homescan data: Are they present and do they matter?," Quantitative Marketing and Economics, Springer, Springer, vol. 8(2), pages 207-239, June.
  12. Sobel, Joel, 1984. "The Timing of Sales," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 51(3), pages 353-68, July.
  13. Han Hong & Matthew Shum, 2006. "Using price distributions to estimate search costs," RAND Journal of Economics, RAND Corporation, RAND Corporation, vol. 37(2), pages 257-275, 06.
  14. Conlisk, John & Gerstner, Eitan & Sobel, Joel, 1984. "Cyclic Pricing by a Durable Goods Monopolist," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 99(3), pages 489-505, August.
  15. Butters, Gerard R, 1977. "Equilibrium Distributions of Sales and Advertising Prices," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 44(3), pages 465-91, October.
  16. Benjamin Eden, 2013. "Price Dispersion And Demand Uncertainty: Evidence From Us Scanner Data," Vanderbilt University Department of Economics Working Papers, Vanderbilt University Department of Economics 13-00015, Vanderbilt University Department of Economics.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:pen:papers:14-002. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dolly Guarini).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.