Price Setting in Online Markets: Basic Facts, International Comparisons, and Cross-Border Integration
American Economic Review
vol. 107,
no. 1, January 2017
(pp. 249-82)
Abstract
We document basic facts about prices in online markets in the United States and Canada, which is a rapidly growing segment of the retail sector. Relative to prices in regular stores, prices in online markets are more flexible and exhibit stronger pass-through (60-75 percent) and faster convergence (half-life less than two months) in response to movements of the nominal exchange rate. Multiple margins of adjustment are active in the process of responding to nominal exchange rate shocks. Properties of goods, sellers, and markets are systematically related to pass-through and the speed of price adjustment for international price differentials.Citation
Gorodnichenko, Yuriy, and Oleksandr Talavera. 2017. "Price Setting in Online Markets: Basic Facts, International Comparisons, and Cross-Border Integration." American Economic Review, 107 (1): 249-82. DOI: 10.1257/aer.20141127Additional Materials
JEL Classification
- F31 Foreign Exchange
- F41 Open Economy Macroeconomics
- L11 Production, Pricing, and Market Structure; Size Distribution of Firms
- L81 Retail and Wholesale Trade; e-Commerce