Existence and persistence of price dispersion: An empirical analysis

Saul Lach*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

113 Scopus citations

Abstract

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.

Original languageAmerican English
Pages (from-to)433-444
Number of pages12
JournalReview of Economics and Statistics
Volume84
Issue number3
DOIs
StatePublished - Aug 2002

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