Abstract
This empirical paper analyzes the existence (and persistence) of price dispersion in the Spanish food retail market as well as the extent to which search costs and vertical product differentiation contribute to explain that price dispersion. Our data set comprises six months of daily prices from supermarket websites: more than 1.7 million price observations from different locations around Spain. Our results reveal that price dispersion of most grocery products is persistent and also remains after we control for store heterogeneity. We also find clear heterogeneity in pricing strategies among the large national supermarket chains. Finally, the extent of consumer searching is low: more than 70% of consumers do not compare prices among supermarkets, and only 4% check the prices at all stores.
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