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Are they always offering the lowest price? An empirical analysis of the persistence of price dispersion in a low inflation environment
Author(s) -
BahadirLust Sebnem,
Loy JensPeter,
Weiss Christoph R.
Publication year - 2007
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.1376
Subject(s) - price dispersion , persistence (discontinuity) , economics , inflation (cosmology) , dispersion (optics) , distribution (mathematics) , econometrics , position (finance) , price setting , price level , microeconomics , monetary economics , mathematics , physics , theoretical physics , engineering , mathematical analysis , geotechnical engineering , optics , finance
We study the existence of price distributions and the intra‐distribution dynamics for 10 food products across 131 retail stores in Germany for a time period of 43 weeks. Based upon Varian's (1980) model of sales, we aim at investigating whether the position of stores within the cross‐sectional price distribution is persistent or changes over time (mixed‐strategy equilibrium). Our results suggest a substantial degree of price dispersion even after controlling for unobserved store heterogeneity. Despite some intra‐distribution dynamics, we find evidence for a persistence of stores in the cross‐sectional price distribution over time. Copyright © 2007 John Wiley & Sons, Ltd.