(...) the latest issue (No. 106) of the ECB Research Bulletin, entitled
“One product, two prices: the border effect in retail prices”.
Teresa Messner (Economist, Monetary Policy Section,
Oesterreichische Nationalbank), Fabio Rumler (Senior Principal,
Monetary Policy Section, Oesterreichische Nationalbank) and Georg
Strasser (Team Lead Economist, Directorate General Research,
Macroeconomics, European Central Bank) examine price differences across
a national border where most factors commonly used to explain
international price differences are absent. While some products cost the
same on both sides of the border between Austria
and Germany, most prices differ significantly. Their study suggests
that retailers have considerable market power vis-à-vis consumers, with
the border effect pointing to retailers choosing to apply price
differentiation – for historical reasons – based on
existing distribution networks. (...)
Alexander Popov
Coordinating Editor, ECB Research Bulletin
DG Research
European Central Bank
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