Targeted Price Controls on Supermarket Products

46 Pages Posted: 5 Feb 2018

See all articles by Diego Aparicio

Diego Aparicio

Massachusetts Institute of Technology (MIT), Department of Economics

Alberto Cavallo

Massachusetts Institute of Technology (MIT) - Sloan School of Management

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Date Written: February 2018

Abstract

We study the impact of targeted price controls for supermarket products in Argentina from 2007 to 2015. Using web-scraping, we collected daily prices for controlled and non-controlled goods and measured the differential effects on inflation, product availability, and price dispersion. We first show that, although price controls are imposed on goods with significant CPI weight, they have a temporary effect on aggregate inflation and no downward effect on other goods. Second, contrary to common beliefs, we find that controlled goods are consistently available for sale. Third, firms compensate for price controls by introducing new product varieties at higher prices. This behavior, which increases price dispersion within narrow categories, is consistent with a standard vertical differentiation model in the presence of price controls.

Suggested Citation

Aparicio, Diego and Cavallo, Alberto, Targeted Price Controls on Supermarket Products (February 2018). NBER Working Paper No. w24275. Available at SSRN: https://ssrn.com/abstract=3118053

Diego Aparicio (Contact Author)

Massachusetts Institute of Technology (MIT), Department of Economics ( email )

Cambridge, MA
United States

Alberto Cavallo

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-416
Cambridge, MA 02142
United States

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