EconPapers    
Economics at your fingertips  
 

Relative price dispersion: evidence and theory

Greg Kaplan, Guido Menzio (), Leena Rudanko and Nicholas Trachter

No 16-6, Working Papers from Federal Reserve Bank of Philadelphia

Abstract: REVISED: 8/1/18: We use a large data set on retail pricing to document that a sizable portion of the cross-sectional variation in the price at which the same good trades in the same period and in the same market is due to the fact that stores that are, on average, equally expensive set persistently different prices for the same good. We refer to this phenomenon as relative price dispersion. We argue that relative price dispersion stems from sellers’ attempts to discriminate between high-valuation buyers who need to make all of their purchases in the same store and low-valuation buyers who are willing to purchase different items from different stores. We calibrate our theory and show that it is not only consistent with the extent and sources of dispersion in the price that different sellers charge for the same good, but also with the extent and sources of dispersion in the prices that different households pay for the same basket of goods and with the relationship between prices paid and the number of stores visited by different households.

Keywords: Price dispersion; Equilibrium product market search; Retail pricing; Goods (search for similar items in EconPapers)
JEL-codes: D40 D83 E31 L11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ind and nep-mac
Date: 2016-02-29, Revised 2019-08-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13) Track citations by RSS feed

Downloads: (external link)
https://www.philadelphiafed.org/-/media/research-a ... 6/wp16-06r.pdf?la=en Full text (text/html)

Related works:
Journal Article: Relative Price Dispersion: Evidence and Theory (2019) Downloads
Working Paper: Relative Price Dispersion: Evidence and Theory (2016) Downloads
Working Paper: Relative Price Dispersion: Evidence and Theory (2016) Downloads
Working Paper: Relative Price Dispersion: Evidence and Theory (2016) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedpwp:16-6

Ordering information: This working paper can be ordered from
http://www.phil.frb.org/econ/wps/index.html

Access Statistics for this paper

More papers in Working Papers from Federal Reserve Bank of Philadelphia Contact information at EDIRC.
Bibliographic data for series maintained by Beth Paul ().

 
Page updated 2019-11-18
Handle: RePEc:fip:fedpwp:16-6