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Did the Euro Foster Online Price Competition? Evidence from an International Price Comparison Site

  • Michael R. Baye
  • J. Rupert J. Gatti
  • Paul Kattuman
  • John Morgan

We study the impact of the Euro on prices charged by online retailers within the European Union. Our data span the period before and after the Euro was introduced, cover a variety of products, and include countries inside and outside of the Eurozone. After controlling for cost, demand, and market structure effects, we show that the pure Euro changeover effect is to raise average prices in the Eurozone by 3 % and average minimum prices by 7%. Finally, we develop a model of online pricing in the context of currency unions and show that these price patterns are broadly consistent with those of clearinghouse models. (JEL D400, D830, F150, L130, M370) Copyright 2006, Oxford University Press.

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Article provided by Western Economic Association International in its journal Economic Inquiry.

Volume (Year): 44 (2006)
Issue (Month): 2 (April)
Pages: 265-279

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Handle: RePEc:oup:ecinqu:v:44:y:2006:i:2:p:265-279
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  1. Narasimhan, Chakravarthi, 1988. "Competitive Promotional Strategies," The Journal of Business, University of Chicago Press, vol. 61(4), pages 427-49, October.
  2. Andreoni, James & Croson, Rachel, 2008. "Partners versus Strangers: Random Rematching in Public Goods Experiments," Handbook of Experimental Economics Results, Elsevier.
  3. Michael R. Baye & John Morgan & Patrick Scholten, 2006. "Information, Search, and Price Dispersion," Working Papers 2006-11, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
  4. Michael R. Baye & John Morgan & Patrick Scholten, 2004. "Price Dispersion in the Small and in the Large: Evidence from an Internet Price Comparison Site," Working Papers 2004-03, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
  5. Nigel F.B. Allington & Paul A. Kattuman & Florian A. Waldmann, 2005. "One Market, One Money, One Price?," International Journal of Central Banking, International Journal of Central Banking, vol. 1(3), December.
  6. Allington, Nigel FB & Kattuman, Paul A & Waldmann, Florian A, 2005. "One Market, One Money, One Price?," MPRA Paper 835, University Library of Munich, Germany.
  7. Simon Latcovich & Howard Smith, 2001. "Pricing, Sunk Costs, and Market Structure Online: Evidence from," Oxford Review of Economic Policy, Oxford University Press, vol. 17(2), pages 217-234, Summer.
  8. Varian, Hal R, 1980. "A Model of Sales," American Economic Review, American Economic Association, vol. 70(4), pages 651-59, September.
  9. Erik Lehmann, 2003. "Pricing Behavior on the WEB: Evidence from Online Travel Agencies," Empirica, Springer, vol. 30(4), pages 379-396, December.
  10. Erik Brynjolfsson & Michael D. Smith, 2000. "Frictionless Commerce? A Comparison of Internet and Conventional Retailers," Management Science, INFORMS, vol. 46(4), pages 563-585, April.
  11. Michael R. Baye & John Morgan, 2004. "Price Dispersion in the Lab and on the Internet: Theory and Evidence," Working Papers 2004-02, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
  12. Michael R. Baye & John Morgan, 2001. "Information Gatekeepers on the Internet and the Competitiveness of Homogeneous Product Markets," American Economic Review, American Economic Association, vol. 91(3), pages 454-474, June.
  13. Morgan, John & Orzen, Henrik & Sefton, Martin, 2006. "An experimental study of price dispersion," Games and Economic Behavior, Elsevier, vol. 54(1), pages 134-158, January.
  14. Giovanni Mastrobuoni, 2004. "The Effects of the Euro-Conversion on Prices and Price Perceptions," Working Papers 101, Princeton University, Department of Economics, Center for Economic Policy Studies..
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