More Amazon Effects: Online Competition and Pricing Behaviors | Zendy

Alberto Cavallo | Zendy

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More Amazon Effects: Online Competition and Pricing Behaviors

Author(s) -

Alberto Cavallo

Publication year - 2018

Publication title -

io: theory ejournal

Language(s) - English

Resource type - Reports

DOI - 10.3386/w25138

Subject(s) - transparency (behavior) , competition (biology) , inflation (cosmology) , aggregate (composite) , economics , the internet , econometrics , monetary economics , microeconomics , business , computer science , ecology , biology , physics , materials science , computer security , theoretical physics , world wide web , composite material

I study how online competition, with its algorithmic pricing technologies and the transparency of the Internet, can change the pricing behavior of large retailers and affect aggregate inflation dynamics. In particular, I show that online competition has raised both the frequency of price changes and the degree of uniform pricing across locations in the U.S. over the past 10 years. These changes make retail prices more sensitive to aggregate ``nationwide" shocks, increasing the pass-through of both gas prices and nominal exchange rate fluctuations.

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