Regional mc parity: do common pricing points reduce deviations from the law of one price?

Thomas Mathä

No 34, BCL working papers from Central Bank of Luxembourg

Abstract: This paper analyses price differences of McDonald?s products in four different countries. I show that pricing at pricing points in different currencies may contribute to explaining deviations from the law of one price. Observing strictly equal prices is more probable if prices are at psychological and fractional pricing points in a common currency. The latter is also found to reduce the size of price deviations. Additionally, price differences increase as transaction costs increase. Based on this data set there is no evidence that the euro has reduced price deviations.

Keywords: Law of one price; psychological and fractional prices; European Monetary Union (search for similar items in EconPapers)
JEL-codes: E31 F41 R11 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2008-09
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Published in Review of World Economics / Weltwirtschaftliches Archiv, 2009, 145(1): 155-166.

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https://www.bcl.lu/fr/Recherche/publications/cahiers_etudes/34/BCLWP034.pdf (application/pdf)

Related works:
Journal Article: Regional Mc parity: do common pricing points reduce deviations from the law of one price? (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:bcl:bclwop:bclwp034

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