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Inflation, Price Dispersion, and Market Structure

  • Mustafa Caglayan

    (Department of Economics, University of Glasgow)

  • Alpay Filiztekin

    (Faculty of Arts and Social Sciences, Sabanci University)

  • Michael T. Rauh

    (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)

In this paper, we use a unique micro-level data set from Istanbul to investigate the empirical relationship between inflation and price dispersion. In particular, our data set includes price observations from three distinct store types: bakkals (convenience stores), pazars (bazaars), and supermarkets. Our findings indicate that pazars exhibit the least amount of price dispersion on average, which is consistent with the fact that menu and search costs are very low in the pazar and that such sellers seem to have very little market power. Moreover, we find that several of the basic inflation-dispersion channels identified by the theoretical literature seem to be operating in our data.

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File URL: http://kelley.iu.edu/riharbau/RePEc/iuk/wpaper/bepp2006-03-caglayan-filiztekin-rauh.pdf
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Paper provided by Indiana University, Kelley School of Business, Department of Business Economics and Public Policy in its series Working Papers with number 2006-03.

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Date of creation: Jan 2006
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Handle: RePEc:iuk:wpaper:2006-03
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