TY  - JOUR
AU  - Boivin,Jean
AU  - Clark,Robert
AU  - Vincent,Nicolas
TI  - Virtual Borders: Online Nominal Rigidities and International Market Segmentation
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 15642
PY  - 2010
Y2  - January 2010
UR  - http://www.nber.org/papers/w15642
L1  - http://www.nber.org/papers/w15642.pdf
N1  - Author contact info:
Jean Boivin
Bank of Canada
234 Wellington Street
Ottawa
Ontario K1A 0G9
Canada
Tel: 613-782-8278
E-Mail: jboivin@bankofcanada.ca

Robert Clark
Institute of Applied Economics
HEC Montreal
3000, chemin de la Cote-Sainte-Catherine
Montreal (Quebec) H3T 2A7
Canada 
Tel: (514) 340-7034
Fax: (514) 340-6469
E-Mail: Robert.Clark@hec.ca

Nicolas Vincent
HEC Montreal
Montreal, Quebec
Canada
E-Mail: nicolas.vincent@hec.ca
AB  - Do prices respond to macro shocks? Does the mere presence of international frontiers hinder trade? We revisit these questions by studying a dataset of online book prices for a number of US and Canadian retailers. We believe our dataset is well suited to this task for a number of reasons: (1) data for multiple retailers are available; (2) the products sold are identical across retailers; (3) the sample spans a period of large fluctuations in the bilateral exchange rate; (4) the nature of the industry is such that physical distance is irrelevant beyond shipping costs which are observable; (5) nominal frictions in the form of menu costs are arguably minimal; and (6) proxies for sales are available for most retailers. Given the unique nature of our dataset, the first objective of the paper is to document the degree of price rigidity and price dispersion. Our main findings are: online book prices display significant stickiness; there is a large degree of heterogeneity across retailers in terms of price rigidity and pricing strategy; price dispersion is high both within and across borders. Also, price levels do not appear to respond to exchange rate fluctuations. Building on the predictions from a simple two-country, multi-firm model and by exploiting information contained both in prices and quantities, we show that market segmentation is probably behind this disconnect .
ER  -