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Price Dispersion (price + dispersion)

Distribution by Scientific Domains
Business, Economics, Finance and Accounting100%

Selected Abstracts

PRICE DISPERSION, INFLATION, AND WELFARE*

INTERNATIONAL ECONOMIC REVIEW, Issue 2 2005
Allen Head
We examine the implications of inflation for both price dispersion and welfare in a monetary search economy. In our economy, if the degree of buyers' incomplete information about prices is fixed, both price dispersion and real prices are increasing in inflation. As the inflation rate approaches the Friedman rule, both price dispersion and welfare losses vanish. If households choose the number of prices to observe, then the optimal inflation rate may exceed the Friedman rule as inflation induces search and, up to a point, raises welfare by eroding market power. [source]

Monopoly Price Dispersion Under Demand Uncertainty

INTERNATIONAL ECONOMIC REVIEW, Issue 3 2001
James D. Jr. DanaArticle first published online: 23 DEC 200
When a monopolist sets its price before its demand is known, then it may set more than one price and limit the availability of its output at lower prices. This article adds demand uncertainty and price rigidities to the standard model of monopoly pricing. When there are two states of demand and the ex post monopoly price is greater when demand is high then the monopolist's optimal ex ante pricing strategy is to set two prices and limit purchases at the lower price. [source]

Price Dispersion and Consumer Reservation Prices

JOURNAL OF ECONOMICS & MANAGEMENT STRATEGY, Issue 1 2005
Simon P. Anderson
We describe firm pricing when consumers follow simple reservation price rules. In stark contrast to other models in the literature, this approach yields price dispersion in pure strategies even when firms have the same marginal costs. At the equilibrium, lower price firms earn higher profits. The range of price dispersion increases with the number of firms: the highest price is the monopoly price, while the lowest price tends to marginal cost. The average transaction price remains substantially above marginal cost even with many firms. The equilibrium pricing pattern is the same when prices are chosen sequentially. [source]

The Dark Side of Information and Market Efficiency in E-Markets,

DECISION SCIENCES, Issue 3 2006
Varun Grover
ABSTRACT Price dispersion reflects the differences in prices for identical products. While in physical markets such dispersion is prevalent due to high search costs, many researchers argue that search costs and price dispersion will be much lower in electronic markets (e-markets). Empirical evidence does not support this contention, and researchers have studied search costs, market factors, and service-quality factors to explain this dispersion. Previous research has largely assumed that more information is better. By ignoring the dark side of information, we argue that only a partial understanding of price dispersion is possible. In this article, information overload and equivocality are studied as two dark attributes of information that lead sellers to different pricing decisions in e-markets. Hypotheses relating these attributes to price dispersion are supported through analysis of 161 product markets. This work opens up new avenues in the study of e-markets and discusses the implications of these findings for research and practice on consumer and seller decisions. [source]

Price dispersion in a model of identical agents with perfect information

PACIFIC ECONOMIC REVIEW, Issue 1 2004
Zhiqi Chen
The driving force in the model is service capacity and congestion cost. Each firm chooses a service capacity. Customers of a firm bear a congestion cost which, for a fixed service capacity, is an increasing function of the number of customers served by this firm. We demonstrate that under certain conditions the combined profit of two firms and the total surplus are higher in a price-dispersion equilibrium than in a single-price equilibrium. [source]

The Dark Side of Information and Market Efficiency in E-Markets,

DECISION SCIENCES, Issue 3 2006
Varun Grover
ABSTRACT Price dispersion reflects the differences in prices for identical products. While in physical markets such dispersion is prevalent due to high search costs, many researchers argue that search costs and price dispersion will be much lower in electronic markets (e-markets). Empirical evidence does not support this contention, and researchers have studied search costs, market factors, and service-quality factors to explain this dispersion. Previous research has largely assumed that more information is better. By ignoring the dark side of information, we argue that only a partial understanding of price dispersion is possible. In this article, information overload and equivocality are studied as two dark attributes of information that lead sellers to different pricing decisions in e-markets. Hypotheses relating these attributes to price dispersion are supported through analysis of 161 product markets. This work opens up new avenues in the study of e-markets and discusses the implications of these findings for research and practice on consumer and seller decisions. [source]

PRICE DISPERSION, INFLATION, AND WELFARE*

INTERNATIONAL ECONOMIC REVIEW, Issue 2 2005
Allen Head
We examine the implications of inflation for both price dispersion and welfare in a monetary search economy. In our economy, if the degree of buyers' incomplete information about prices is fixed, both price dispersion and real prices are increasing in inflation. As the inflation rate approaches the Friedman rule, both price dispersion and welfare losses vanish. If households choose the number of prices to observe, then the optimal inflation rate may exceed the Friedman rule as inflation induces search and, up to a point, raises welfare by eroding market power. [source]

Indexing, cointegration and equity market regimes

INTERNATIONAL JOURNAL OF FINANCE & ECONOMICS, Issue 3 2005
Carol Alexander
Abstract This paper examines, from a market efficiency perspective, the performance of a simple dynamic equity indexing strategy based on cointegration. A consistent ,abnormal' return in excess of the benchmark is demonstrated over different time horizons and in different real world and simulated stock markets. A measure of stock price dispersion is shown to be a leading indicator for the abnormal return and their relationship is modelled as a Markov switching process of two market regimes. We find that the entire abnormal return is associated with the high volatility regime as the indexing model implicitly adopts a strategic position that pays off during market crashes, whilst effectively tracking the benchmark in normal market circumstances. Therefore we find no evidence of market inefficiency. Nevertheless our results have implications for equity fund managers: we show how, without any stock selection, solely through a smart optimization that has an implicit element of market timing, the benchmark performance can be significantly enhanced. Copyright © 2005 John Wiley & Sons, Ltd. [source]

Price Dispersion and Consumer Reservation Prices

JOURNAL OF ECONOMICS & MANAGEMENT STRATEGY, Issue 1 2005
Simon P. Anderson
We describe firm pricing when consumers follow simple reservation price rules. In stark contrast to other models in the literature, this approach yields price dispersion in pure strategies even when firms have the same marginal costs. At the equilibrium, lower price firms earn higher profits. The range of price dispersion increases with the number of firms: the highest price is the monopoly price, while the lowest price tends to marginal cost. The average transaction price remains substantially above marginal cost even with many firms. The equilibrium pricing pattern is the same when prices are chosen sequentially. [source]

Market integration in Russia during the transformation years,

THE ECONOMICS OF TRANSITION, Issue 3 2003
Konstantin Gluschenko
Abstract A cross-sectional relationship among Russian regions between price dispersion and per capita income dispersion is used to measure the degree of integration between regional commodity markets. The sequence of cross-sectional estimations for each month of the period spanning 1992 through 2000 provides the temporal pattern of market integration in Russia, yielding an integration trajectory. The regional fragmentation of the national market increased during the early years of transition but integration has subsequently tended to improve notwithstanding occasional deviations from this trend. [source]