Citation

Discussion Paper Details

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Full Details

Title: Market Integration and Convergence to the Law of One Price: Evidence from the European Car Market

Author(s): Pinelopi Koujianou Goldberg and Frank Verboven

Publication Date: August 2001

Keyword(s): law of one price, market integration and price convergence

Programme Area(s): Industrial Organization and International Trade and Regional Economics

Abstract: This Paper exploits the unique experiment of European market integration to investigate the relationship between integration and price convergence in international markets. Using a panel data set of car prices we examine how the process of integration has affected cross-country price dispersion in Europe. We find surprisingly strong evidence of convergence towards both the absolute and the relative versions of Purchasing Power Parity. Our analysis illuminates the main sources of segmentation in international markets and suggests the type of institutional changes that can successfully reduce it.

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Bibliographic Reference

Goldberg, P and Verboven, F. 2001. 'Market Integration and Convergence to the Law of One Price: Evidence from the European Car Market'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=2926