Price Dispersion in the Grocery Market*

Abstract

This paper provides an exploratory study of price dispersion in the grocery market and checks for the consistency of the evidence on this price dispersion with the existing theories of price dispersion due to costly consumer search, competition, and consumer heterogeneity in the context of the grocery market. Three dimensions of price dispersion are studied: price dispersion for a certain brand across stores, price dispersion within a category in a store across brands, and price dispersion over time for a certain brand. The results show that the standardized price dispersion is positively correlated with consumer search costs, competition, and consumer heterogeneity.

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