Uniform Pricing Within and Across Regions: New Evidence from Argentina
Abstract: We compile a new database of grocery prices in Argentina, with over 9 million observations per day. Our main novel inding is that product prices almost do not vary within stores of a chain (i.e., uniform pricing). We also find that prices do not change significantly with regional conditions or shocks, particularly so for chains that operate in many regions. To study the impact of uniform pricing on both consumers and firms, this paper uses a tractable model based on the trade literature. Motivated by our empirical findings, each firm has to set the same price in both regions. Relative to a counterfactual in which firms can set different prices across regions (i.e., flexible pricing), uniform pricing reduces firms? profits by 0.4%. Consumers, however, prefer uniform pricing and are willing to give up 6.7% of their income to avoid flexible pricing in the baseline model. The effect on consumers, however, depends on how much uniform pricing limits firms? power to extract consumer surplus and how heterogeneous the regions are.
File format is application/pdf
Description: Full text
Provider: Federal Reserve Bank of St. Louis
Part of Series: Working Papers
Publication Date: 2019-02-28
Pages: 33 pages