Information and Price Dispersion: Theory and Evidence

63 Pages Posted: 18 Aug 2015

See all articles by Dieter Pennerstorfer

Dieter Pennerstorfer

Austrian Institute of Economic Research (WIFO)

Philipp Schmidt-Dengler

University of Vienna - Faculty of Business, Economics, and Statistics

Nicolas Schutz

University of Mannheim

Christoph Weiss

Vienna University of Economics and Business - Department of Economics

Biliana Yontcheva

Vienna University of Economics and Business

Date Written: August 2015

Abstract

We examine the relationship between information and price dispersion in the retail gasoline market. We first show that the clearinghouse models in the spirit of Stahl (1989) generate an inverted-U relationship between information and price dispersion. We construct a new measure of information based on precise commuter data from Austria. Regular commuters can freely sample gasoline prices on their commuting route, providing us with spatial variation in the share of informed consumers. We use detailed information on gas station level prices to construct price dispersion measures. Our empirical estimates of the relationship are in line with the theoretical predictions.

Keywords: commuter data, price dispersion, retail gasoline, search

JEL Classification: D43, D83, L13

Suggested Citation

Pennerstorfer, Dieter and Schmidt-Dengler, Philipp and Schutz, Nicolas and Weiss, Christoph and Yontcheva, Biliana, Information and Price Dispersion: Theory and Evidence (August 2015). CEPR Discussion Paper No. DP10771. Available at SSRN: https://ssrn.com/abstract=2645724

Dieter Pennerstorfer (Contact Author)

Austrian Institute of Economic Research (WIFO) ( email )

Philipp Schmidt-Dengler

University of Vienna - Faculty of Business, Economics, and Statistics ( email )

Vienna, A-1210
Austria

Nicolas Schutz

University of Mannheim ( email )

D-68131 Mannheim
Germany

Christoph Weiss

Vienna University of Economics and Business - Department of Economics ( email )

Augasse 2-6
A-1090 Wien
Austria

Biliana Yontcheva

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

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