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Philipp Schmidt-Dengler (University of Vienna)

27 September 2016 @ 12:00

 

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Date:
27 September 2016
Time:
12:00
Event Category:

“Information and Price Dispersion: Theory and Evidence”

abstract

We study the empirical importance of consumer information in generating price dispersion. Limited information is the key element generating price dispersion in models
of homogeneous goods markets. We show that in these models the global relationship between information and price dispersion is an inverse-U shape. We test this mechanism using a new measure of information based on precise commuter data from Austria. Commuters sample gasoline prices on their commuting route, providing us with spatial variation in the share of informed consumers. Using gasoline station level prices we construct dispersion measures. Our empirical estimates are in line with the theoretical predictions.