Monday, November 05, 2007

Price Dispersion

This is purely anecdotal, but it seems to me that there is more "price dispersion" in Australia than in the US. Price dispersion is the variation in prices charged by different sellers for the same item. It's closely related to price discrimination but the latter is intentional charging of different prices by the same firm while price dispersion is charging of different prices by different firms, though it would also include charging of different prices in different outlets by the same firm which is possibly price discrimination (it's not price discrimination to the extent that costs differ across locations).

Prices certainly do vary in the US from luxury outlets to discount stores and from poor to rich neighborhoods but I don't remember seeing as big a variation between stores that are more or less side by side. For example, you can buy an Oral-B or Colgate toothbrush for anywhere from $1 to $7 within a few store fronts in the Canberra Centre (the big mall in Canberra City). The $1 toothbrushes were apparently intended for the Vietnam or Thai market but are being sold in Australia. Large ranges also exist for food items (particulary fruit and vegetables) at side by side stores. Also for items like bed sheets the range can be very wide for a given quality level. Are Australians less willing to shop around the stores to find bargains than Americans? ("Shopping around" would result in competition and convergence to the same price), or do I have the wrong impression of the US? Or is this just a Canberra (the wealthiest metropolitan area in Australia) phenomenon?

P.S. Just one price I noticed today - haircut at a franchised chain - $A22, U.S. price $US14. Another example of where the exchange rate ought to be - though 63 U.S. Cents is a bit at the low end (it's currently at 92 U.S. Cents).

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