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Price Setting in Online Markets: Basic Facts, International Comparisons, and Cross-border Integration

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  • Yuriy Gorodnichenko
  • Oleksandr Talavera

Abstract

We document basic facts about prices in online markets in the U.S. and Canada, a rapidly growing segment of the retail sector. Relative to prices in regular stores, prices in online markets are more flexible as well as exhibit stronger pass-through (60-75 percent) and faster convergence (half-life less than 2 months) in response to movements of the nominal exchange rate. Multiple margins of adjustment (frequency of price changes, direction of price changes, size of price changes, exit of sellers) are active in the process of responding to nominal exchange rate shocks. Furthermore, we use the richness of our dataset to show that degree of competition, stickiness of prices, synchronization of price changes, reputation of sellers, and returns to search effort are important determinants of pass-through and speed of price adjustment for international price differentials.

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  • Yuriy Gorodnichenko & Oleksandr Talavera, 2014. "Price Setting in Online Markets: Basic Facts, International Comparisons, and Cross-border Integration," NBER Working Papers 20406, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:20406
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    Cited by:

    1. Bonadio, Barthélémy & Fischer, Andreas M. & Saure, Philip, 2016. "The speed of exchange rate pass-through," Globalization Institute Working Papers 282, Federal Reserve Bank of Dallas.
    2. repec:oup:jeurec:v:16:y:2018:i:6:p:1764-1811. is not listed on IDEAS
    3. Alberto Cavallo, 2017. "Are Online and Offline Prices Similar? Evidence from Large Multi-channel Retailers," American Economic Review, American Economic Association, vol. 107(1), pages 283-303, January.
    4. repec:prg:jnlcbr:v:2017:y:2017:i:3:id:185:p:41-50 is not listed on IDEAS
    5. repec:eee:jbrese:v:80:y:2017:i:c:p:63-72 is not listed on IDEAS
    6. Dvir, Eyal & Strasser, Georg, 2018. "Does marketing widen borders? Cross-country price dispersion in the European car market," Journal of International Economics, Elsevier, vol. 112(C), pages 134-149.
    7. Hunold, Matthias & Kesler, Reinhold & Laitenberger, Ulrich & Schlütter, Frank, 2018. "Evaluation of best price clauses in online hotel bookings," International Journal of Industrial Organization, Elsevier, vol. 61(C), pages 542-571.
    8. Alberto Cavallo & Brent Neiman & Roberto Rigobon, 2015. "The Price Impact of Joining a Currency Union: Evidence from Latvia," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 63(2), pages 281-297, September.
    9. José Anson & Mauro Boffa, 2018. "Consumer Arbitrage in Cross-Border E-commerce," RSCAS Working Papers 2018/17, European University Institute.
    10. repec:kap:jincot:v:17:y:2017:i:4:d:10.1007_s10842-017-0246-3 is not listed on IDEAS
    11. Kline, Patrick & Petkova, Neviana & Williams, Heidi & Zidar, Owen, 2017. "Who Profits from Patents? Rent-Sharing at Innovative Firms," Institute for Research on Labor and Employment, Working Paper Series qt6mr8598q, Institute of Industrial Relations, UC Berkeley.
    12. Flavio Delbono & Gemma Dipoppa & Luca Lambertini & Carlo Reggiani, 2017. "A Single Espresso, Please! Rationalizing Espresso Price Dispersion Across Italian Cities," Journal of Industry, Competition and Trade, Springer, vol. 17(4), pages 465-478, December.
    13. Alex Coad & Nestor Duch-Brown, 2017. "Barriers to European cross-border E-commerce," JRC Working Papers on Digital Economy 2017-03, Joint Research Centre (Seville site).
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    15. Nicoletta Berardi & Patrick Sevestre & Jonathan Thébault, 2017. "The Determinants of Consumer Price Dispersion: Evidence from French Supermarkets," Post-Print hal-01685367, HAL.
    16. repec:cje:issued:v:50:y:2017:i:3:p:738-777 is not listed on IDEAS
    17. repec:bfr:rueban:2018:54 is not listed on IDEAS
    18. Yuriy Gorodnichenko & Viacheslav Sheremirov & Oleksandr Talavera, 2018. "Price Setting in Online Markets: Does IT Click?," Journal of the European Economic Association, European Economic Association, vol. 16(6), pages 1764-1811.
    19. S. Dupraz, 2017. "A Kinked-Demand Theory of Price Rigidity," Working papers 656, Banque de France.
    20. Andrea Mantovani & Claudio Piga & Carlo Reggiani, 2019. "Much ado about nothing? Online platform price parity clauses and the EU Booking.com case," The School of Economics Discussion Paper Series 1909, Economics, The University of Manchester.
    21. Sheremirov, Viacheslav, 2015. "Price dispersion and inflation: new facts and theoretical implications," Working Papers 15-10, Federal Reserve Bank of Boston.
    22. repec:eee:ecolet:v:164:y:2018:i:c:p:124-127 is not listed on IDEAS

    More about this item

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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