Measures Of Price Dispersion Research Articles

Price Dispersion, Bargaining Power, and Consumers’ Online Shopping Experience in e‐Commerce: Evidence from Online Transactions

With the development of artificial intelligence and machine learning technology, online shopping is increasingly becoming the mainstream shopping method. It is challenging to investigate the correlation between price dispersion and bargaining. In accordance with the assimilation‐contrast theory, this study theorizes about the influence of price dispersion on consumers’ bargaining power and it aims to analyze the moderating role of online shopping experience of consumers. Therefore, this paper develops a discrete price model to measure the dispersion of product prices in the marketplace. Cluster analysis was subsequently conducted to preliminary explore the association between price dispersion and bargaining. With the construction of a multiple regression model, the phenomena found by the cluster analysis are further analyzed. The results indicate that the bargaining power of consumers increases with the increase of the price dispersion level. At high levels of the price dispersion, high‐experienced consumers exhibit greater bargaining power than low‐experienced consumers. At low levels of price dispersion, low‐experienced consumers have higher bargaining power than high‐experienced consumers. Finally, we demonstrate the validity and robustness of the study results by grouping regressions and replacing four measures of price dispersion.

Spatial Distribution of the International Food Prices: Unexpected Heterogeneity and Randomness

Global food prices are typically analysed in a time-series framework. We complement this approach by focusing on the spatial price dispersion of the country-pair bilateral trade in the international food trade network (IFTN), for ten relevant commodities. The main purposes are to verify if the Law of One Price (LOP) holds and to investigate the emergence of randomness in the price-formation mechanism.We distinguish between the “internal” variance, which indicates the magnitude of price discrimination, and the “external” variance, that is a measure of price dispersion. We find that, for some commodities, spatial price dispersion is remarkable and persistent over time (i.e., failure of the LOP) and that there exists a strict correlation between price spikes and peaks in spatial price variability.We test whether the price distribution can be replicated through a stochastic process of extraction. Surprisingly, the actual distribution of prices, for several commodities, is well described by a random distribution. Then, the process of data aggregation is not neutral because the information at the micro-level scale might be lost at the macro-scale, due to the complexity of the IFTN. Finally, we discuss some possible economic explanations of these outcomes and the main methodological, environmental, and policy consequences.

Variable Elasticity Demand and Inflation Persistence

We propose a novel explanation for the well-known persistent inflation response to monetary policy shocks by introducing variable elasticity demand curves in a staggered price model with trend inflation. The demand curves induce strategic complementarity in price setting and thus generate inflation persistence under positive trend inflation through the effect on inflation dynamics of a measure of price dispersion, which differs from relative price distortion. We also show that credible disinflation leads to a gradual decline in inflation a fall in output and that lower trend inflation reduces inflation persistence, as observed around the time of the Volcker disinflation.

Variable Elasticity Demand and Inflation Persistence

Persistent responses of inflation to monetary policy shocks have been difficult to explain by existing models of the monetary transmission mechanism without embedding controversial intrinsic inertia of inflation. Our paper addresses this issue using a staggered price model with trend inflation, a smoothed-off kink in demand curves, and a fixed cost of production. In this model, inflation exhibits a persistent response to a policy shock even in the absence of its intrinsic inertia, because the kink causes a measure of price dispersion, which is intrinsically inertial, to become a key source of inflation persistence under the positive trend inflation rate. {{p}} In addition, output and labor productivity both rise after an expansionary policy shock as in an estimated structural vector autoregression model. Moreover, credible disinflation induces a gradual decline in inflation and a fall in output as observed during the Volcker disinflation era.

ON FRUITFUL AND FUTILE TESTS OF THE RELATIONSHIP BETWEEN SEARCH AND PRICE DISPERSION

We exploit cross‐sectional and temporal differences in search intensity in order to examine the relationship between search costs and price dispersion using a hand‐collected panel data set from Jerusalem's Shuk Mahane Yehuda outdoor market. We present empirical evidence that price dispersion increases with the cost of search using several different measures of price dispersion; however, our interpretation of this finding is sensitive to the search proxy in question. We also address several acute difficulties facing empiricists seeking to test theoretical price‐dispersion models in which consumers are heterogeneous in their search behavior. (JEL L11, L13)

An Empirical Analysis of Search Costs and Price Dispersion

We exploit cross-sectional and temporal differences in search intensity in order to examine the relationship between search costs and price dispersion using a hand-collected panel data set from Jerusalem’s Shuk Mahane Yehuda outdoor market. We present empirical evidence that price dispersion increases with the cost of search using several different measures of price dispersion, however, our interpretation of this finding is sensitive to the search proxy in question. We also address several acute difficulties facing empiricists seeking to test theoretical price-dispersion models in which consumers are heterogeneous in their search behavior.

Can Price Dispersion Reveal Distance-Related Trade Costs? Evidence from the United States

We offer insights on how distance-related trade costs may best be inferred from price-dispersion measures. Using a simple spatial model of price dispersion, we argue that measures of price dispersion that are not spatially informed can mislead researchers into concluding that distance-related costs are small even when such costs are the major determinant of price dispersion. With intra-United States data on eleven goods, we find that distance-related costs are large and are indeed underestimated when inferred from standard, non-spatial, price dispersion measures. Our empirical findings have implications for studies of market integration policies (such as trade liberalization and currency unions) and the significance of economic geography.

Is Africa Integrating? Evidence from Product Markets

Integration into the global trading environment is viewed as a key factor underlying the success of the fastest growing economies. Yet many African countries remain isolated and appear to have failed to achieve the level integration of these fast growing economies. This paper presents a price-based assessment of product market integration in Africa using disaggregated retail prices for over 200 products and 13 African cities. Product market integration is first assessed using absolute and relative measures of price dispersion. This followed by an econometric analysis to identify some of the domestic, regional and global factors that have contributed towards product market integration in Africa. Overall, we find evidence of increased product market integration in Africa. The volatility of real exchange rates between African countries has fallen over the past two and a half decades. Product price dispersion at the retail level amongst the sample of African cities also fell, although much of the decline was concentrated in North Africa during the early 1990s. The econometric estimates reveal that trade costs, as proxied by distance and MFN tariffs, are the dominant determinant of price dispersion amongst the African cities. External forces also matter. Global trends in price dispersion contributed around 29 percent of the overall increase in integration.

Price Dispersion in Spatial Perspective: Theory and Evidence

We develop a simple Hotelling spatial-trade model of price dispersion to examine how distance-related costs affect price dispersion, and we offer some insights on how such costs may best be inferred from price-dispersion measures. Our theoretical model suggests that measures of price dispersion that are not spatially-informed can mislead researchers into concluding that distance-related costs are small even when such costs are the major determinant of price dispersion. In estimates based on price dispersion across U.S. cities of eleven goods, we find that distance-related costs are large and are indeed under-estimated when inferred from standard, non-spatial, price dispersion measures.

Does Reimportation Reduce Price Differences for Prescription Drugs? Lessons from the European Union

To examine the effect of parallel trade on patterns of price dispersion for prescription drugs in the European Union. Longitudinal data from an IMS Midas database of prices and units sold for drugs in 36 categories in 30 countries from 1993 through 2004. The main outcome measures were mean price differentials and other measures of price dispersion within European Union countries compared with within non-European Union countries. We identified drugs subject to parallel trade using information provided by IMS and by checking membership lists of parallel import trade associations and lists of approved parallel imports. Parallel trade was not associated with substantial reductions in price dispersion in European Union countries. In descriptive and regression analyses, about half of the price differentials exceeded 50 percent in both European Union and non-European Union countries over time, and price distributions among European Union countries did not show a dramatic change concurrent with the adoption of parallel trade. In regression analysis, we found that although price differentials decreased after 1995 in most countries, they decreased less in the European Union than elsewhere. Parallel trade for prescription drugs does not automatically reduce international price differences. Future research should explore how other regulatory schemes might lead to different results elsewhere.

Online Price Dispersion Within and Between Seven European Countries

This paper provides a comprehensive analysis of online price dispersion in Europe, across a broad range of product categories and countries. Using the dominant European price comparison site we collected firm specific prices, weekly, from sevcn European countries (Denmark, France, Italy, Netherlands, Spain, Sweden and the United Kingdom) for 31 unique products, falling into five distinct product categories (printers, PDAs, scanners, games consoles, computer games and music), over the nine month period October 2001 to June 2002. The resulting data set comprises over 17,000 individual price observations. Using a number of alternative measures of price dispersion we find significant differences in the degree of price dispersion observed in online markets, both between countries and across product categories. We consider alternative explanations for online price dispersion and analyse their significance in explaining the observed differences.

Inflation and Price Dispersion: Evidence from the Brazilian Stabilization Program

The paper considers the question of information imperfections. The aim is to prove the hypothesis that economic agents make decisions based on imperfect information. In order to do so, it uses correlation between a measure of price dispersion and inflation rates, which are a proxy of the information stock held by agents. Those in favor of the perfectly informed agents theory argue that price dispersion reflects perceived differences in factors like quality, location, market structure and service agreement. If this is correct, changes in price dispersion would occur only if there were changes in these factors. If they are not altered and price dispersion changes, one can come to the conclusion that other factors cause the dispersion. A change in the inflation level brings a good opportunity to look for the other factors. If price dispersion is higher during periods of high inflation rates, this means that the information stock held by agents is one of its determinants. This is due to the hypothesis that the inflation rate is a good proxy of the information stock held by economic agents. Theoretical arguments linking higher inflation to lower information stock are also presented in the paper. So, it can be argued that price dispersion exists partly due to the presence of imperfectly informed agents. A proof for this argument is that price dispersion is higher when the information stock is lower (inflation rates are higher).

On the Rate Structure of the American Life Insurance Market

ABSTRACTThis article re‐examines the conclusion of previous studies that price dispersion is extreme in the American whole life insurance market. We take an axiomatic approach to the problem of measuring “price” dispersion in the market for the multiparameter whole life contracts, studying the distribution across contract offers of a price index which is uniquely determined by two conditions. In contrast to the accepted wisdom, we find that the derived measure of price dispersion is only 3.6% and that much of this dispersion can be accounted for by measurement error.