One Market, One Money, One Price? Price Dispersion in the European Union

Allington, Nigel F.B.; Kattuman, Paul; Waldmann, Florian A.

doi:10.2139/ssrn.633581

Cited by 16 publications

(12 citation statements)

References 35 publications

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“…On the other hand, the dispersion of relative price levels for other developed economies does not appear to display any marked trends, though it shows non-negligible fluctuations (possibly linked to exchange rate fluctuations). Note also that while dispersion appears to have been greater among euro area countries than among 11 See Lane (2006), Engle and Rogers (2004) and Allington et al (2005) for an analysis of price convergence within the euro area using more disaggregated data. Figure 13 points to significant β-convergence both before and after the creation of the euro area and until the onset of the crisis, and for both groups of countries.…”

Section: Figure 8 Dispersion Of Inflation Ratesmentioning

confidence: 99%

Patterns of Convergence and Divergence in the Euro Area

Estrada¹,

Galı́²,

López‐Salido³

2013

IMF Econ Rev

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Section: Figure 8 Dispersion Of Inflation Ratesmentioning

confidence: 99%

Patterns of Convergence and Divergence in the Euro Area

Estrada¹,

Galı́²,

López‐Salido³

2013

IMF Econ Rev

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“…Moreover, the existence of significant price dispersion even in integrated markets, such as nation‐states or the European Union, is confirmed by numerous empirical studies. For a recent overview and replication, see Allington et al (2004).…”

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confidence: 99%

The Dynamics of General Equilibrium

Gintis¹

2007

The Economic Journal

124

103

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The Walrasian general equilibrium model is the centrepiece of modern economic theory, but progress in understanding its dynamical properties has been meagre. This article shows that the instability of WalrasÕ tâtonnement process is due to the public nature of prices, which leads to excessive correlation in the behaviour of economic agents. When prices are private information, a dynamic with a globally stable stationary state obtains in economies that are unstable in the tâtonnment process. We provide an agent-based model of a multi-sector Walrasian economy with production and exchange, in which prices are private information. This economy is dynamically well behaved.In WalrasÕ original description of general equilibrium (Walras, 1954(Walras, [1874), market clearing was effected by a central authority. This authority, which has come to be known as the ÔauctioneerÕ, remains today because no one has succeeded in producing a plausible decentralised dynamic model of producers and consumers engaged in market interaction in which prices and quantities move towards market-clearing levels. Only under implausible assumptions can the continuous ÔauctioneerÕ dynamic be shown to be stable (Fisher, 1983), and in a discrete model, even these assumptions (gross substitutability, for instance) do not preclude instability and chaos in price movements (Saari, 1985;Bala and Majumdar, 1992). 1 Moreover, contemporary analysis of excess demand functions suggests that restrictions on preferences are unlikely to entail the stability of tâtonnement (Sonnenschein, 1972(Sonnenschein, , 1973Debreu, 1974;Kirman and Koch, 1986).It has been a half century since Debreu (1952) and Arrow and Debreu (1954) provided a satisfactory analysis of the equilibrium properties market economies, yet we know virtually nothing systematic about Walrasian dynamics. This suggests that we lack understanding of one or more fundamental properties of market exchange.This article provides an agent-based model of the Walrasian economy. An agentbased model is a computer simulation of the repeated play of a game in which a large number of agents are endowed with software-encoded strategies governing both how they play the game and how they gather information and update their behaviour. The disequilibrium behaviour of agents in our agent-based models is governed by a replicator dynamic (Taylor and Jonker, 1978) in which, over time, successful agents tend in Darwinian fashion to increase in frequency at the expense of unsuccessful agents. We describe the process of shifting from lower to higher payoff strategies as ÔimitationÕ, * I thank Kenneth Arrow, Robert Axtell, Samuel Bowles, John Geanakoplos, Peter Hammond, David Levine, Axel Leijonhufvud, Charles Plott, Sharon Harrison, Leigh Tesfatsion, two reviewers, and participants in seminars at the Santa Fe Institute, Columbia University, UCLA, and Trento for helpful comments, and the John D. and Catherine T. MacArthur Foundation for financial support. The computer programs used in this article are available from the author....

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“…We also include standard VAT rates that generally apply to the product categories which we analyse. 4 The scale of differences in all these variables among the Member States of the European Union is given in Tab. 5.…”

Section: Price Dispersion Patternmentioning

confidence: 99%

What Drives Price Dispersion in the European E-commerce Industry?

Gyódi

Sobolewski

Ziembiński

2017

Central European Economic Journal

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An important aspect of economic integration of the European Union is price convergence on digital single market. In this study, we propose a novel way to measure price dispersion in the e-commerce industry, using a custom made web-scraping tool. We target all the major price comparisons sites in the 26 EU member states, which enables us to collect price signals from thousands of retail shops operating on-line. We analyse pricing data of 182 branded products sold on-line across the EU, representing the most popular categories: fashion, consumer electronics, gaming and software, and cosmetics. We find considerable dispersion of both pre and post-vat on-line prices ranging from 20% to 40%, depending on the product category. The observed on-line price dispersion is driven by both cost factors and the level of per capita income, which is consistent with the view that producers or large distributors might engage in strategic price discrimination induced by income heterogeneity.At first look, our results point to the unexplored potential for cross-border trade, which could be released by policy interventions with regards to delivery, payment or law harmonization. However, under strategic price discrimination, reduced costs of arbitrage for consumers might induce discriminating firms to lower the magnitude of price dispersion between high and low income countries, bringing adverse welfare changes of a priori unknown net effect.

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One Market, One Money, One Price? Price Dispersion in the European Union

Cited by 16 publications

References 35 publications

Patterns of Convergence and Divergence in the Euro Area

Patterns of Convergence and Divergence in the Euro Area

The Dynamics of General Equilibrium

What Drives Price Dispersion in the European E-commerce Industry?

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