Borderplex Menu Evidence for the Law of One Price: A Convergence Approach
Posted: 27 Feb 2016
Date Written: February 25, 2009
A convergence approach is utilized to examine deviations from the law of one price. Sample data are menu prices for eight identical products sold by international restaurant franchises in Mexico and the United States. The results suggest mean reverting behaviour in real exchange rate movements in response to recent information.
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