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Existence And Persistence Of Price Dispersion: An Empirical Analysis

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  • Saul Lach

Abstract

Using a unique data set on store-level monthly prices of four homogenous products sold in Israel, I study the existence and characteristics of the dispersion of prices across stores, as well as its persistence over time. I find that price dispersion prevails even after controlling for observed and unobserved product heterogeneity. Moreover, intradistribution mobility is significant: stores move up and down the crosssectional price distribution. Thus, consumers cannot learn about stores that consistently post low prices. As a consequence, price dispersion does not disappear and persists over time as predicted by Varian's (1980) model of sales. © 2002 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology

Suggested Citation

  • Saul Lach, 2002. "Existence And Persistence Of Price Dispersion: An Empirical Analysis," The Review of Economics and Statistics, MIT Press, vol. 84(3), pages 433-444, August.
    • Handle: RePEc:tpr:restat:v:84:y:2002:i:3:p:433-444
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    File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/003465302320259457
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    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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