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  3. American Economic Journal: Microeconomics
  4. August 2019
  5. Relative Price Dispersion: Evidence and Theory

Relative Price Dispersion: Evidence and Theory

  • Greg Kaplan
  • Guido Menzio
  • Leena Rudanko
  • Nicholas Trachter
American Economic Journal: Microeconomics
vol. 11, no. 3, August 2019
(pp. 68-124)
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Abstract

Relative price dispersion refers to persistent differences in the price that different retailers set for one particular good relative to the price they set for other goods. Relative price dispersion accounts for 30 percent of the overall variance of prices at which the same good is sold during the same week and in the same market. Relative price dispersion can be rationalized as the consequence of a pricing strategy used by sellers to discriminate between high-valuation buyers who need to make all of their purchases in one store, and low-valuation buyers who are able to purchase different items in different stores.

Citation

Kaplan, Greg, Guido Menzio, Leena Rudanko, and Nicholas Trachter. 2019. "Relative Price Dispersion: Evidence and Theory." American Economic Journal: Microeconomics, 11 (3): 68-124. DOI: 10.1257/mic.20170126

Additional Materials

JEL Classification

  • D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
  • L11 Production, Pricing, and Market Structure; Size Distribution of Firms
  • L21 Business Objectives of the Firm
  • L81 Retail and Wholesale Trade; e-Commerce
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