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Title:On Price-Setting for Identical Products in Markets without Formal Trade Barriers PDF Logo
Authors:Hassink, Wolter H.J.
Schettkat, Ronald
Issue Date:2001
Series/Report no.:IZA Discussion paper series 315
Abstract:This paper investigates price-setting for truly homogenous products sold in markets without any formal trade barriers. We use data from IKEA, a furniture company selling identical products in an identical shopping environment in different EU countries. We get four remarkable outcomes: 1) The law of one price does not hold. 2) Country-specific effects of non-tradable cost components are important. 3) Pricing to the market surely occurs but price discrimination is limited by incomplete information. 4) The unexplained part of betweencountry price variation for identical products is about 75% which leaves most of the intercountry price variation unexplained.
Subjects:Price setting
price discrimination
JEL:D4
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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