Price setting in online markets: Basic facts, international comparisons, and cross-border integration
Open accessAbstract
We document basic facts about prices in online markets in the U.S. and Canada, a rapidly growing segment of the retail sector.Relative to prices in regular stores, prices in online markets are more flexible as well as exhibit stronger pass-through (60-75 percent) and faster convergence (half-life less than 2 months) in response to movements of the nominal exchange rate.Multiple margins of adjustment (frequency of price changes, direction of price changes, size of price changes, exit of sellers) are active in the process of responding to nominal exchange rate shocks.Furthermore, we use the richness of our dataset to show that degree of competition, stickiness of prices, synchronization of price changes, reputation of sellers, and returns to search effort are important determinants of pass-through and speed of price adjustment for international price differentials.
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There is some evidence that online-only retailers may adjust their pricing faster than offline-only ones in response to exogenous shocks.
“While there is some evidence that online-only retailers may adjust their pricing faster than offline-only ones in response to exogenous shocks(Gorodnichenko and Talavera, 2017)”
From Sanctions and Russian online prices (2024) · cites this paper as Gorodnichenko and Talavera, 2017
The Introduction and “Pass-through and the speed of price adjustment” report faster adjustment of online prices than regular-store prices following exchange-rate movements. That supports the claim’s core comparison, but the paper compares sales channels, not retailers shown to operate exclusively online or exclusively offline. (LLM, conf=0.84)
Experimental — accuracy not yet measuredOnline prices are flexible and pass through exchange rate movements.
“Gorodnichenko and Talavera (2017) emphasize the flexibility and pass-through of online prices in response to exchange rate movements.”
From Sanctions and Russian online prices (2024) · cites this paper as Gorodnichenko and Talavera (2017)
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References 69 · Cited by 43
Research works printed but not linked: 4
- Abowd, John M., and David Card, 1989. "On the Covariance Structure of Earnings and Hours Changes," Econometrica 57(2), 411-445.
- Dornbusch, Rudiger, 1987. "Exchange Rates and Prices," American Economic Review 77(1), 93- 106.
- Engel, Charles, and John H. Rogers, 1996. "How Wide Is the Border?" American Economic Review 86(5), 1112-1125.
- Rogoff, Kenneth, 1996. "The Purchasing Power Parity Puzzle," Journal of Economic Literature 34(2), 647-668. Statistics Canada. 2013. "Individual Internet use and e-commerce, 2012." Ottawa, Canada.
- Authors
- Gorodnichenko, Y., & Talavera, O.
- Affiliations
- National Bureau of Economic Research (US)
- Swansea University (GB)
- Venue
- American Economic Review
- Publisher
- American Economic Association
- Published
- 2017-01-01
- Volume
- 107
- Issue
- 1
- Pages
- 249-282
- ISSN
- 0002-8282 (ISSN-L)
- OpenAlex
- W1519651631
- Cited by
- 43
- References
- 69
- Citations by year
- 2025: 2 · 2024: 1 · 2023: 8 · 2022: 1 · 2021: 5 · 2020: 2 · 2019: 2 · 2018: 6 · 2017: 4 · 2016: 6 · 2015: 3 · 2014: 3
- FWCI
- 17.06
- Type
- journal article
- Language
- en
- Open access
- green
- doi.org
- Locations
- American Economic Review (publishedVersion)
- National Bureau of Economic Research (publishedVersion)
- White Rose Research Online (University of Leeds, The University of Sheffield, University of York) (acceptedVersion)
- RePEc: Research Papers in Economics (submittedVersion)
- SSRN Electronic Journal (submittedVersion)
- White Rose Research Online (University of Leeds, The University of Sheffield, University of York) (submittedVersion)
- eScholarship (California Digital Library) (submittedVersion)
- University of Birmingham Research Portal (University of Birmingham) (submittedVersion, other-oa)
- Topics
- Social Sciences › Business, Management and Accounting › Marketing › Consumer Market Behavior and Pricing
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Economics of Agriculture and Food Markets
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Merger and Competition Analysis
- Keywords
- price setting, pass-through, exchange rate pass-through, price adjustment, price convergence, international price differentials, price stickiness, price synchronization, seller reputation, search effort, competition, e-commerce
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