A New Test of Price Dispersion
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Ekkehard Kessner
Abstract
Economists have been concerned with price dispersion for apparently homogeneous goods for a long time. Many models have been developed which explain price dispersion by imperfect consumer information about prices in the market. There are few empirical tests of these models. Moreover, these tests at most show that the observed price dispersion is consistent with the models; however, an alternative explanation of price dispersion is always that the goods sold are not homogeneous from the consumers' point of view but that there are quality differences which cannot be observed by the empirical economist. Since both models yield different welfare conclusions, it would be important to distinguish empirically between the two explanations. We use data from the German life insurance industry for tests of the two models. Our data support the equilibrium price dispersion model.
© 2019 by Walter de Gruyter Berlin/Boston
Articles in the same Issue
- Experimental Evidence for Attractions to Chance
- A Theory of Migration as a Response to Relative Deprivation
- Maximizing Happiness?
- Pareto-Improving Redistribution and Pure Public Goods
- Country Legal Environments and Corporate Investment Performance
- A New Test of Price Dispersion
Articles in the same Issue
- Experimental Evidence for Attractions to Chance
- A Theory of Migration as a Response to Relative Deprivation
- Maximizing Happiness?
- Pareto-Improving Redistribution and Pure Public Goods
- Country Legal Environments and Corporate Investment Performance
- A New Test of Price Dispersion
