Information and Price Dispersion: Theory and Evidence

Weiss, Christoph and Pennerstorfer, Dieter ORCID: https://orcid.org/0000-0002-6191-4397 and Yontcheva, Biliana and Schmidt-Dengler, Philipp and Schutz, Nicolas (2020) Information and Price Dispersion: Theory and Evidence. International Economic Review, 61 (2). pp. 871-899. ISSN 1468-2354

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Abstract

Limited information is the key element generating price dispersion in models of homogeneous‐goods markets. We show that the global relationship between information and price dispersion is an inverse‐U shape. We test this mechanism for the retail gasoline market using a new measure of information based on commuter data from Austria. Commuters sample gasoline prices on their commuting route, providing us with spatial variation in the share of informed consumers. Our empirical estimates are in line with the theoretical predictions. We also quantify how information affects average prices paid and the distribution of surplus in the gasoline market.

Item Type: Article
Divisions: Departments > Volkswirtschaft > Volkswirtschaftspolitik u Industrieökon.
Version of the Document: Published
Depositing User: Gertraud Novotny
Date Deposited: 16 Jun 2020 13:21
Last Modified: 16 Jun 2020 13:21
Related URLs:
FIDES Link: https://bach.wu.ac.at/d/research/results/93252/
URI: https://epub.wu.ac.at/id/eprint/7631

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