CORDIS
EU research results

CORDIS

English EN

Understanding price dispersion: new structural models of price discrimination and applications

Project information

Grant agreement ID: 852815

Status

Ongoing project

  • Start date

    1 April 2020

  • End date

    31 March 2025

Funded under:

H2020-EU.1.1.

  • Overall budget:

    € 1 224 312,50

  • EU contribution

    € 1 224 312,50

Hosted by:

FONDATION JEAN-JACQUES LAFFONT,TOULOUSE SCIENCES ECONOMIQUES

France

Objective

Structural models of demand and supply in differentiated product markets are widely used for policy evaluation and in antitrust. They typically consider firms set uniform prices and fail to explain price dispersion within products. Yet, it is common that the same good is purchased at different prices and this has major consequences for consumers that standard models cannot analyze. This proposal extends standard models to incorporate price dispersion. These new structural models are used to shed lights on the sources of price dispersion, their importance and evaluate the distributional impacts and profitability of price dispersion on important markets (automobile, grocery items and online markets).

We model and analyze specific sources of price dispersion. First, we consider price dispersion within product lines and the pricing of quality with a model of second degree price discrimination. Second, we develop a model of third degree price discrimination with limited arbitrage opportunity. When price discrimination is not explicit, consumers are not locked in and some individuals are able to arbitrage and pay the lowest price. The third project considers individualized pricing and purchase history and develops a structural model in which firms learn about consumers’ preferences by observing their previous purchase patterns and leverage this information by setting individualized prices. Finally, we consider a framework with spatial price dispersion to analyze price dispersion for grocery items across locations. As a transversal project, we provide a reliable method to test alternative models of market equilibrium and apply them to confront our new models to the standard ones.

Host institution

FONDATION JEAN-JACQUES LAFFONT,TOULOUSE SCIENCES ECONOMIQUES

Address

Allee De Brienne, Manufacture Des Tabacs 21
31000 Toulouse

France

Activity type

Research Organisations

EU Contribution

€ 1 224 312,50

Beneficiaries (1)

FONDATION JEAN-JACQUES LAFFONT,TOULOUSE SCIENCES ECONOMIQUES

France

EU Contribution

€ 1 224 312,50

Project information

Grant agreement ID: 852815

Status

Ongoing project

  • Start date

    1 April 2020

  • End date

    31 March 2025

Funded under:

H2020-EU.1.1.

  • Overall budget:

    € 1 224 312,50

  • EU contribution

    € 1 224 312,50

Hosted by:

FONDATION JEAN-JACQUES LAFFONT,TOULOUSE SCIENCES ECONOMIQUES

France