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Price Dispersion And Demand Uncertainty: Evidence From Us Scanner Data

  • Benjamin Eden

    ()

    (Vanderbilt University)

I use a flexible price version of the Prescott (1975) hotels model to explain variations in price dispersion across goods sold by supermarkets in Chicago. The main finding is that price dispersion measures are positively correlated with proxies for demand uncertainty. I also find that price dispersion measures are negatively correlated with the average price but are not negatively correlated with the revenues from selling the good (across stores and weeks) and with the number of stores that sell the good.

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Paper provided by Vanderbilt University Department of Economics in its series Vanderbilt University Department of Economics Working Papers with number 13-00015.

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Date of creation: 03 Oct 2013
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Handle: RePEc:van:wpaper:vuecon-sub-13-00015
Contact details of provider: Web page: http://www.vanderbilt.edu/econ/wparchive/index.html

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  1. Salop, Steven & Stiglitz, Joseph E, 1977. "Bargains and Ripoffs: A Model of Monopolistically Competitive Price Dispersion," Review of Economic Studies, Wiley Blackwell, vol. 44(3), pages 493-510, October.
  2. Bental, Benjamin & Eden, Benjamin, 1993. "Inventories in a Competitive Environment," Journal of Political Economy, University of Chicago Press, vol. 101(5), pages 863-86, October.
  3. James D. Dana & Jr., 1998. "Advance-Purchase Discounts and Price Discrimination in Competitive Markets," Journal of Political Economy, University of Chicago Press, vol. 106(2), pages 395-422, April.
  4. Shilony, Yuval, 1977. "Mixed pricing in oligopoly," Journal of Economic Theory, Elsevier, vol. 14(2), pages 373-388, April.
  5. Eden, Benjamin, 1990. "Marginal Cost Pricing When Spot Markets Are Complete," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1293-1306, December.
  6. N. Gregory Mankiw & Ricardo Reis, 2007. "Sticky Information in General Equilibrium," Journal of the European Economic Association, MIT Press, vol. 5(2-3), pages 603-613, 04-05.
  7. Raymond Deneckere & James Peck, 2012. "Dynamic Competition With Random Demand and Costless Search: A Theory of Price Posting," Econometrica, Econometric Society, vol. 80(3), pages 1185-1247, 05.
  8. Pratt, John W & Wise, David A & Zeckhauser, Richard, 1979. "Price Differences in Almost Competitive Markets," The Quarterly Journal of Economics, MIT Press, vol. 93(2), pages 189-211, May.
  9. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
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