Virtual Borders: Online Nominal Rigidities And International Market Segmentation

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Executive Summary

The authors study a dataset of online book prices for a number of US and Canadian retailers. They believe their dataset is well suited to this task for a number of reasons: data for multiple retailers are available; the products sold are identical across retailers; the sample spans a period of large fluctuations in the bilateral exchange rate; the nature of the industry is such that physical distance is irrelevant beyond shipping costs which are observable; nominal frictions in the form of menu costs are arguably minimal; and proxies for sales are available for most retailers.

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