Price Setting in Online Markets: Basic Facts, International Comparisons, and Cross-Border Integration
Yuriy Gorodnichenko, Oleksandr Talavera
American Economic Review · 2017 · Volume 107 · Issue 1
Abstract
We document basic facts about prices in online markets in the United States and Canada, which is a rapidly growing segment of the retail sector. Relative to prices in regular stores, prices in online markets are more flexible and exhibit stronger pass-through (60-75 percent) and faster convergence (half-life less than two months) in response to movements of the nominal exchange rate. Multiple margins of adjustment are active in the process of responding to nominal exchange rate shocks. Properties of goods, sellers, and markets are systematically related to pass-through and the speed of price adjustment for international price differentials.
Keywords
Foreign Exchange, Open Economy Macroeconomics, Production, Pricing, and Market Structure, Size Distribution of Firms, Retail and Wholesale Trade, e-Commerce
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