Working Paper: CEPR ID: DP13960
Authors: François Fontaine; Julien Martin; Isabelle Mejean
Abstract: We study the cross-sectional dispersion of prices paid by EMU importers for French products. We document a significant level of price dispersion both within product categories across exporters, and within exporters across buyers. This latter source of price discrepancies, sellers' price discrimination across buyers, is indicative of deviations from the law-of-one price. Price discrimination (i) is substantial within the EU, within the euro area, and within EMU countries; (ii) has not decreased over the last two decades; (iii) is more prevalent among the largest firms and for moredifferentiated products; (iv) is lower among retailers and wholesalers; (v) is also observed within almost perfectly homogenous product categories, which suggests that a non-negligible share of price discrimination is triggered by heterogeneous markups rather than quality or composition effects. We then estimate a rich statistical decomposition of the variance of prices to shed light on exporters' pricing strategies.
Keywords: No keywords provided
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| price discrimination (D40) | substantial price discrepancies (P22) |
| firm size (L25) | price discrimination (D40) |
| product differentiation (L15) | price discrimination (D40) |
| market power (L11) | price discrimination (D40) |
| exporters' ability to set high prices (F14) | observed price discrepancies (P22) |
| importers' tendencies to renegotiate prices (F14) | observed price discrepancies (P22) |
| largest firms (L25) | price discrimination (D40) |
| differentiated products (L15) | price discrimination (D40) |
| homogeneous product categories (L68) | price discrimination (D40) |
| heterogeneous markups (F12) | price discrimination (D40) |
| mean coefficient of variation of prices across buyers (P22) | price discrimination (D40) |