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More Amazon Effects: Online Competition and Pricing Behaviors

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  • Alberto Cavallo

Abstract

I study how online competition, with its algorithmic pricing technologies and the transparency of the Internet, can change the pricing behavior of large retailers and affect aggregate inflation dynamics. In particular, I show that online competition has raised both the frequency of price changes and the degree of uniform pricing across locations in the U.S. over the past 10 years. These changes make retail prices more sensitive to aggregate ``nationwide" shocks, increasing the pass-through of both gas prices and nominal exchange rate fluctuations.

Suggested Citation

  • Alberto Cavallo, 2018. "More Amazon Effects: Online Competition and Pricing Behaviors," NBER Working Papers 25138, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:25138
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Inflation risks and inflation expectations
      by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets on 2019-02-25 13:49:59

    Citations

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    Cited by:

    1. Fontaine, François & Martin, Julien & Mejean, Isabelle, 2020. "Price discrimination within and across EMU markets: Evidence from French exporters," Journal of International Economics, Elsevier, vol. 124(C).
    2. Diego Daruich & Julian Kozlowski, 2018. "Uniform Pricing Within and Across Regions: New Evidence from Argentina," Working Papers 2018-10, Federal Reserve Bank of St. Louis, revised 28 Feb 2019.
    3. Weinand, Sebastian, 2020. "Measuring spatial price differentials: A comparison of stochastic index number methods," Discussion Papers 12/2020, Deutsche Bundesbank.
    4. Claudio Borio, 2019. "Central banking in challenging times," BIS Working Papers 829, Bank for International Settlements.

    More about this item

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E7 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics

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