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Does marketing widen borders? Cross-country price dispersion in the European car market

Eyal Dvir and Georg Strasser ()

Journal of International Economics, 2018, vol. 112, issue C, 134-149

Abstract: We study cross-country price differences in the European market for new passenger cars based on detailed pricing and technical data. Car prices in Europe converged until the year 2003, but not thereafter. Even then the price range of the median model across EU15 countries was close to 20%. This cross-country price differentiation is systematically linked to common product features, varies significantly across models and increases systematically with the market segment. Identical cars are positioned individually by country, for example via tailored feature bundles. Both the convergence of prices in anticipation of a future reduction of barriers to arbitrage and the systematic price differentials point to active pricing-to-market strategies that treat countries as marketing regions.

Keywords: International price dispersion; Arbitrage; Law of one price; Market segmentation; European car market; Border effect (search for similar items in EconPapers)
JEL-codes: F15 F31 L11 L62 D22 (search for similar items in EconPapers)
Date: 2018
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Related works:
Working Paper: Does Marketing Widen Borders? Cross-Country Price Dispersion in the European Car Market (2017) Downloads
Working Paper: Does marketing widen borders? Cross-country price dispersion in the European car market (2017) Downloads
Working Paper: Does Marketing Widen Borders? Cross-Country Price Dispersion in the European Car Market (2014) Downloads
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