Market Structure, Inflation, and Price Dispersion

Mustafa Caglayan (), Alpay Filiztekin and Michael Rauh ()

No 04/2, Discussion Papers in Economics from Division of Economics, School of Business, University of Leicester

Abstract: In this paper, we investigate the impact of market structure on the relationship between inflation and price dispersion. We first propose a new empirical model of the relationship between inflation and dispersion with firmer theoretical foundations, and then extend the basic model to incorporate the potential effects of market structure. We estimate the basic and market structure specifications using a unique micro-level data set from Istanbul, which consists of monthly price observations from three different store types: convenience stores, open-air markets, and supermarkets. Our empirical findings support almost all of the basic and market structure predictions.

Keywords: inflation; market structure; menu cost models; micro panel data; price dispersion (search for similar items in EconPapers)
JEL-codes: C23 D40 D83 E31 (search for similar items in EconPapers)
Date: 2004-02, Revised 2004-06
New Economics Papers: this item is included in nep-mac and nep-mic
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Working Paper: Market Structure, Inflation, and Price Dispersion (2004)
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