International Deviations From the Law of One Price: the Role of Search Frictions and Market Share*
Year: 2004
Type: article
Abstract: This article examines the size and persistence of international deviations from the law of one price in an industry with search frictions. Cost differences lead foreign and domestic firms to price differently within countries. When local firms are more common in each country, there are large and persistent price differences across countries. Large and persistent changes in international relative costs lead to large and persistent changes in international relative prices. Dynamic considerations imply that the amount of a cost shock firms pass through to prices is U‐shaped in the market share of firms receiving the shock.
Source: International Economic Review
Author: George Alessandria
Institution: Federal Reserve Bank of Philadelphia
Language: English
Topic: Global trade and economics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W1996571769