A Single Espresso, Please! Rationalizing Espresso Price Dispersion Across Italian Cities

Quaderni - Working Paper DSE N° 1017

18 Pages Posted: 18 Jul 2015

See all articles by Flavio Delbono

Flavio Delbono

University of Bologna - School of Economics, Management, and Statistics

Gemma Dipoppa

Stanford University

Luca Lambertini

University of Bologna - Department of Economics

Carlo Reggiani

University of Manchester

Date Written: July 16, 2015

Abstract

This paper aims at providing an explanation of the observed espresso price dispersion across major Italian cities. The empirical evidence suggests a positive relationships between the average espresso price in a city and the number of coffee shops (normalized for the adult population) operating in that city. This finding is shown to be robust after controlling for GDP per capita and consumers.price index. We provide an interpretation of the empirical findings relying on a model of price competition delivering a continuum of Nash equilibria, where firms adjust the mark-up to offset the negative effect of any increase in their number.

Keywords: price dispersion, espresso prices, market competition

JEL Classification: L11, L13, L66

Suggested Citation

Delbono, Flavio and Dipoppa, Gemma and Lambertini, Luca and Reggiani, Carlo, A Single Espresso, Please! Rationalizing Espresso Price Dispersion Across Italian Cities (July 16, 2015). Quaderni - Working Paper DSE N° 1017, Available at SSRN: https://ssrn.com/abstract=2631997 or http://dx.doi.org/10.2139/ssrn.2631997

Flavio Delbono (Contact Author)

University of Bologna - School of Economics, Management, and Statistics ( email )

Strada Maggiore 45
Bologna, 40125
Italy

Gemma Dipoppa

Stanford University ( email )

Stanford, CA 94305
United States

Luca Lambertini

University of Bologna - Department of Economics ( email )

Strada Maggiore 45
Bologna, 40125
Italy
+39 051 2092600 (Phone)
+39 051 2092664 (Fax)

Carlo Reggiani

University of Manchester ( email )

Oxford Road
Manchester, N/A M13 9PL
United Kingdom

HOME PAGE: http://https://sites.google.com/view/carloreggianieconomics/home

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