The Review of Economics and Statistics Vol. 84 No. 3 2002
Existence and Persistence of Price Dispersion: An Empirical Analysis
Abstract
The Hebrew University of Jerusalem and NBER.Using a unique data set on store-level monthly prices of four homogenous products sold in Israel, I study the existence and characteristics of the dispersion of prices across stores, as well as its persistence over time. I find that price dispersion prevails even after controlling for observed and unobserved product heterogeneity. Moreover, intra-distribution mobility is significant: stores move up and down the cross-sectional price distribution. Thus, consumers cannot learn about stores that consistently post low prices. As a consequence, price dispersion does not disappear and persists over time as predicted by Varian's (1980) model of sales.
- DOI
- 10.1162/003465302320259457
- Volume
- 84
- Issue
- 3
- Pages
- 433-444
- Language
- en
- Sources
- crossref openalex