Price Dispersion and Informational Frictions: Evidence from Supermarket Purchase
29 Nov 2023
15:00 -16:00
GMT
Open to: All
Room W4.03 (Cambridge Judge Business School)
Trumpington St
Cambridge
CB2 1AG
United Kingdom
Join our Economics and Policy seminar
Speaker: Dr Helena Perrone, Mannheim University
About the seminar topic
Traditional demand models assume that consumers are perfectly informed about product characteristics, including price. However, this assumption may be too strong. Unannounced sales are a common supermarket practice. As we show, retailers frequently change position in the price rankings, thus making it unlikely that consumers are aware of all deals offered in each period. Further empirical evidence on consumer behaviour is also consistent with a model with price information frictions. We develop such a model for horizontally differentiated products and structurally estimate the search cost distribution.
The results show that in equilibrium, consumers observe a limited number of prices before making a purchase decision, which implies that imperfect information is indeed important and that local market power is potentially high. We also show that a full information demand model yields severely biased price elasticities.
Speaker bio
Helena Perrone is an assistant professor in Economics at the University of Mannheim and a CEPR research affiliate. She received her PhD in Economics at the Toulouse School of Economics (France).
Her main research interests are: empirical Industrial Organisation; demand estimation; applied microeconomics.
Register
No registration required. If you have any questions about this seminar, please email Luke Slater.