IDEAS home Printed from https://ideas.repec.org/a/ier/iecrev/v50y2009i3p803-829.html
   My bibliography  Save this article

Consumer Search, Price Dispersion, And International Relative Price Fluctuations

Author

Listed:
  • George Alessandria

Abstract

This article develops a model of consumer search consistent with the evidence of substantial price dispersion and time spent shopping within countries to study international deviations from the law of one price (LOP) and relative price fluctuations. Search frictions lead firms to price discriminate across markets based on the opportunity cost of search, which depends on the local wage. With productivity and taste shocks estimated from the data, deviations from the LOP are as volatile and persistent as in the data. Fluctuations in relative wages, real exchange rates, and the terms of trade are also consistent with the data. Copyright © (2009) by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • George Alessandria, 2009. "Consumer Search, Price Dispersion, And International Relative Price Fluctuations," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(3), pages 803-829, August.
  • Handle: RePEc:ier:iecrev:v:50:y:2009:i:3:p:803-829
    as

    Download full text from publisher

    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-2354.2009.00549.x
    File Function: link to full text
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Marina Glushenkova & Andros Kourtellos & Marios Zachariadis, 2016. "Barriers to price convergence," University of Cyprus Working Papers in Economics 02-2016, University of Cyprus Department of Economics.
    2. Zhen Huo & Jose-Victor Rios-Rull, 2015. "Tightening Financial Frictions on Households, Recessions, and Price Reallocations," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(1), pages 118-139, January.
    3. Svetlana Fedoseeva & Laura M. Werner, 2016. "How linear is pricing-to-market? Empirical assessment of hysteresis and asymmetry of PTM," Empirical Economics, Springer, vol. 50(3), pages 1065-1090, May.
    4. Correa-López Mónica & de Blas Beatriz, 2012. "International Transmission of Medium-Term Technology Cycles: Evidence from Spain as a Recipient Country," The B.E. Journal of Macroeconomics, De Gruyter, vol. 12(1), pages 1-52, November.
    5. Cavallari, Lilia, 2013. "A note on firm entry, markups and the business cycle," Economic Modelling, Elsevier, vol. 35(C), pages 528-535.
    6. Ryan Monarch, 2014. ""It's Not You, It's Me": Breakup In U.S.-China Trade Relationships," Working Papers 14-08, Center for Economic Studies, U.S. Census Bureau.
    7. Punnoose Jacob & Lenno Uuskula, 2016. "Deep habits and exchange rate pass-through," CAMA Working Papers 2016-17, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    8. Auer, Raphael A. & Schoenle, Raphael S., 2016. "Market structure and exchange rate pass-through," Journal of International Economics, Elsevier, vol. 98(C), pages 60-77.
    9. Luigi Paciello & Andrea Pozzi & Nicholas Trachter, 2013. "Price Dynamics with Customer Markets," EIEF Working Papers Series 1328, Einaudi Institute for Economics and Finance (EIEF), revised Dec 2017.
    10. Johannes Stroebel & Joseph Vavra, 2014. "House Prices, Local Demand, and Retail Prices," NBER Working Papers 20710, National Bureau of Economic Research, Inc.
    11. Cavallari, Lilia, 2013. "Firms' entry, monetary policy and the international business cycle," Journal of International Economics, Elsevier, vol. 91(2), pages 263-274.
    12. Stevens, Luminita & Chahrour, Ryan, 2015. "Equilibrium Price Dispersion and the Border Effect," Staff Report 522, Federal Reserve Bank of Minneapolis.
    13. Mathä, Thomas Y. & Pierrard, Olivier, 2011. "Search in the product market and the real business cycle," Journal of Economic Dynamics and Control, Elsevier, vol. 35(8), pages 1172-1191, August.
    14. Strasser, Georg, 2013. "Exchange rate pass-through and credit constraints," Journal of Monetary Economics, Elsevier, vol. 60(1), pages 25-38.
    15. Yan Bai & José-Víctor Ríos-Rull, 2015. "Demand Shocks and Open Economy Puzzles," American Economic Review, American Economic Association, vol. 105(5), pages 644-649, May.
    16. Pennings, Steven, 2017. "Pass-through of competitors' exchange rates to US import and producer prices," Journal of International Economics, Elsevier, vol. 105(C), pages 41-56.
    17. Burstein, Ariel & Gopinath, Gita, 2014. "International Prices and Exchange Rates," Handbook of International Economics, Elsevier.
    18. repec:pal:imfecr:v:65:y:2017:i:3:d:10.1057_s41308-017-0036-2 is not listed on IDEAS
    19. Beatriz de Blas & Katheryn N. Russ, 2015. "Understanding Markups in the Open Economy," American Economic Journal: Macroeconomics, American Economic Association, vol. 7(2), pages 157-180, April.
    20. Ratul, Lahkar, 2011. "The dynamic instability of dispersed price equilibria," Journal of Economic Theory, Elsevier, vol. 146(5), pages 1796-1827, September.
    21. repec:pal:imfecr:v:65:y:2017:i:3:d:10.1057_s41308-017-0037-1 is not listed on IDEAS
    22. Nicholas Trachter & Andrea Pozzi & Luigi Paciello, 2014. "Markups Dynamics with Customer Markets," 2014 Meeting Papers 39, Society for Economic Dynamics.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ier:iecrev:v:50:y:2009:i:3:p:803-829. 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: (Wiley-Blackwell Digital Licensing) or (). General contact details of provider: http://edirc.repec.org/data/deupaus.html .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.