Price dispersion

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Definition

Price dispersion is the phenomenon, and extent, of variation across sellers and markets of the price of identical items. Typically, price dispersion refers to the variation between prices of different sellers at the same time, but it might also measure the variation between prices of sellers over a period of time.

Typically, each seller has the same price for the same good for all buyers; however, sellers practicing price discrimination may have different prices for different buyers. Thus, the pricing strategy of price discrimination practiced by individual sellers, or by the sellers as a whole, may be partially responsible for price dispersion.

Price dispersion measures the extent to which the law of one price is violated.

References

Journal references