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A New Test of Price Dispersion

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  • Ekkehard Kessner
  • Mattias K. Polborn

Abstract

Economists have been concerned with price dispersion for apparently homogeneous goods for a long time. Many models have been developed which explain price dispersion by imperfect consumer information about prices in the market. There are few empirical tests of these models. Moreover, these tests at most show that the observed price dispersion is consistent with the models; however, an alternative explanation of price dispersion is always that the goods sold are not homogeneous from the consumers' of view but that there are quality differences which cannot be observed by the empirical economist. Copyright Verein fü Socialpolitik and Blackwell Publishers Ltd 2000.

Suggested Citation

  • Ekkehard Kessner & Mattias K. Polborn, 2000. "A New Test of Price Dispersion," German Economic Review, Verein für Socialpolitik, vol. 1(2), pages 221-240, May.
  • Handle: RePEc:bla:germec:v:1:y:2000:i:2:p:221-240
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    References listed on IDEAS

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    1. Carlson, John A & McAfee, R Preston, 1983. "Discrete Equilibrium Price Dispersion," Journal of Political Economy, University of Chicago Press, vol. 91(3), pages 480-493, June.
    2. Reinganum, Jennifer F, 1979. "A Simple Model of Equilibrium Price Dispersion," Journal of Political Economy, University of Chicago Press, vol. 87(4), pages 851-858, August.
    3. Shepard, Andrea, 1991. "Price Discrimination and Retail Configuration," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 30-53, February.
    4. John W. Pratt & David A. Wise & Richard Zeckhauser, 1979. "Price Differences in almost Competitive Markets," The Quarterly Journal of Economics, Oxford University Press, vol. 93(2), pages 189-211.
    5. Asha Sadanand & Louis Wilde, 1982. "A Generalized Model of Pricing for Homogeneous Goods under Imperfect Information," Review of Economic Studies, Oxford University Press, vol. 49(2), pages 229-240.
    6. Dahlby, Bev & West, Douglas S, 1986. "Price Dispersion in an Automobile Insurance Market," Journal of Political Economy, University of Chicago Press, vol. 94(2), pages 418-438, April.
    7. Gerard R. Butters, 1977. "Equilibrium Distributions of Sales and Advertising Prices," Review of Economic Studies, Oxford University Press, vol. 44(3), pages 465-491.
    8. George J. Stigler, 1961. "The Economics of Information," Journal of Political Economy, University of Chicago Press, vol. 69, pages 213-213.
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    Cited by:

    1. Márcio I. Nakane & Sérgio Mikio Koyama, 2003. "Search Costs and the Dispersion of Loan Interest Rates in Brazil," Anais do XXXI Encontro Nacional de Economia [Proceedings of the 31th Brazilian Economics Meeting] d28, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
    2. Martin Sefton & John Morgan, 2001. "Information externalities in a model of sales," Economics Bulletin, AccessEcon, vol. 4(7), pages 1-5.
    3. Henrik Orzen & Martin Sefton, 2003. "Buyer Subsidies in an Equilibrium Model of Price Dispersion," German Economic Review, Verein für Socialpolitik, vol. 4, pages 497-501, November.

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