Explaining the endurance of price level differences in the euro area

Dixon, Huw ORCID: https://orcid.org/0000-0002-9875-8965, Kosma, Theodora and Petroulas, Pavlos 2024. Explaining the endurance of price level differences in the euro area. Open Economies Review 10.1007/s11079-024-09794-1

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Abstract

In this paper we anaIyse price level differences in the euro area focusing on the impact of market structure and exploring how consumer behaviour can influence firms’ pricing. We consider two elements of market structure: producer market competition structure and the less explored structure of retail market competition. Regarding consumer behaviour we focus primarily on consumer habits. To this effect we utilise an extensive data set on retail prices and quantities for 41 product categories of fast-moving consumer goods across 58 regions in 10 euro area countries. Our results indicate that observed price differences reflect effects from diverse sources. The competition structure of the goods’ producers is found to be an important determinant of price differences. However, we also find that retail market structure and consumer habits also matter, explaining a significant and economically meaningful share of observed price differences. This points to possible new and important determinants of price differences across countries that go beyond the traditional goods market structure.

Item Type:	Article
Date Type:	Published Online
Status:	In Press
Schools:	Business (Including Economics)
Publisher:	Springer
ISSN:	0923-7992
Date of First Compliant Deposit:	2 December 2024
Date of Acceptance:	15 November 2024
Last Modified:	09 Jan 2025 13:26
URI:	https://orca.cardiff.ac.uk/id/eprint/174445

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