Date Added: Jun 2009
This paper studies price setting within a chain of grocery stores, using a scanner database that contains observations of retail prices for 435 products within 75 stores over 121 weeks. The authors find price dispersion within the chain. Although price dispersion is pervasive 75% of the prices are equal to the modal price. The mode changes frequently: 35% of the modes change in an average week. This suggests that the distribution of prices may react relatively fast to aggregate shocks. Stores differentiate themselves by the prices of relatively few items.