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This article uses individual supermarket prices and analyses to what extent absolute deviations from the law of one price are attributable to transaction costs. The results indicate that absolute percentage price differences increase with distance, but at a decreasing rate. Similarly, crossing borders increases price deviations, while being inside the former Belgo-Luxembourg currency union has the opposite effect. This result nurtures the hopes that the euro may be able to reduce regional and cross-border price differences in the long term.

Der Euro und Weiterführende Regionale Preiskonvergenz? Resultate aus der ‘Groß-Region’ um Luxemburg