On Price-Setting for Identical Products in Markets without Formal Trade Barriers

Wolter Hassink () and Ronald Schettkat
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Wolter Hassink: Utrecht University

No 315, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper investigates price-setting for truly homogenous products sold in markets without any formal trade barriers. We use data from IKEA, a furniture company selling identical products in an identical shopping environment in different EU countries. We get four remarkable outcomes: 1) The law of one price does not hold. 2) Country-specific effects of non-tradable cost components are important. 3) Pricing to the market surely occurs but price discrimination is limited by incomplete information. 4) The unexplained part of between-country price variation for identical products is about 75% which leaves most of the inter-country price variation unexplained.

Keywords: price discrimination; Price setting (search for similar items in EconPapers)
JEL-codes: D4 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2001-06
New Economics Papers: this item is included in nep-ifn
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Citations: View citations in EconPapers (15)

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