Price dispersion in Uruguay

Abstract

Retail prices for a product vary across time and places. The sources that drive price disp ersion can be grouped into three categories: (i) price diffrences across markets, (ii) price diferences across stores in a market, and (iii) within-store price variation over time. I find there is price dispersion in the retail market in Uruguay. The decomposition shows that 39.16 percent is across-markets, 36.90 percent corresponds to across-store, and 23.94 percent over time. These results highlight the relevance of intertemporal pricing strategies of stores, and how they set prices at the local market to understand price dispersion. Nevertheless, in recent years across-market price dispersion has been increasing, which can imply a structural change of price dispersion sources. The price dispersion phenomenon and its decomposition are heterogeneous. Across products, stores, and over time I find differences in price dispersion as well as differences in the sources behind it.