The Impact of Technology on Regional Price Dispersion in the Us

Abstract

We analyze the behavior of inflation in the era of fast pace information thanks to technological advances, especially internet. Owing to readily available information, prices/inflation should quickly converge under perfect competition. To this end, we explore the possibility of price convergence in regional inflation in the USA including the permanency of such a phenomenon if observed, a concern for monetary policy makers. Empirically, we analyze standard deviation of regional inflation with special attention to technology. We show that standard deviation of inflation is not constant over time, but not necessarily ever-declining. Technology seems to help reduce price dispersion across regions.

Did the COVID-19 pandemic permanently impact e-commerce in the US market?

“…Although the "digitalization/e-commercialization" of business has been around for a while, the size of e-commerce activities compared with the in-store (brick and mortar) sales and GDP was deemed to be too "small" to be explicitly included in certain government statistics in the pre-COVID era (Isaac, 2018;Wadhwani, 2000). That might explain why several studies have failed to find a strong "Amazon effect" on prices (Ciccarelli & Osbat, 2017;Charbonneau et al, 2017;Hatzius et al, 2017;Genc, 2021). Parenthetically, the Amazon effect refers to the role of the company Amazon in leading pricing decisions in the US retail business.…”

“…The Amazon effect is closely related to the pervasiveness of online shopping activities. Recently, Genc (2021) showed that the Amazon effect in the US was not substantial in the pre-COVID era. The low volume of online sales during the prepandemic years was credited with yielding that result.…”