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Price dispersion, chain heterogeneity, and search in online grocery markets

Author

Listed:
  • Xulia González

    (Facultad Economía, Campus Lagoas Marcosende)

  • Daniel Miles-Touya

    (Facultad Economía, Campus Lagoas Marcosende)

Abstract

This paper identifies patterns of cross-sectional and temporal price dispersion—in the Spanish online grocery retail market—and evaluates the extent to which search costs and chain heterogeneity explain such dispersion. We build a data set comprising 836,074 prices for the most popular grocery products sold online by Spanish national chains at different locations. Our results show that price dispersion is still present (albeit to a lesser extent) even after controlling for chain heterogeneity and that it persists over time. We structurally estimate search costs distributions for two different baskets of goods using price data while accounting for vertical product differentiation. The analysis suggests that the extent of search is low. According to our estimates more than two thirds of consumers do not compare prices among supermarkets. We also find that more frequently purchased products have lower search cost and also lower price–cost margins.

Suggested Citation

  • Xulia González & Daniel Miles-Touya, 2018. "Price dispersion, chain heterogeneity, and search in online grocery markets," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 9(1), pages 115-139, March.
  • Handle: RePEc:spr:series:v:9:y:2018:i:1:d:10.1007_s13209-018-0172-6
    DOI: 10.1007/s13209-018-0172-6
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    1. Araujo, Julia P. & Rodrigues, Mauro, 2020. "Evidence on search costs under hyperinflation in Brazil: The effect of Plano Real," Brazilian Review of Econometrics, Sociedade Brasileira de Econometria - SBE, vol. 40(1), August.

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    More about this item

    Keywords

    Price dispersion; Retail food market; Pricing strategies; Search costs;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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