More Amazon Effects: Online Competition and Pricing Behaviors
I study how online competition, with its algorithmic pricing technologies and the transparency of the Internet, can change the pricing behavior of large retailers and affect aggregate inflation dynamics. In particular, I show that online competition has raised both the frequency of price changes and the degree of uniform pricing across locations in the U.S. over the past 10 years. These changes make retail prices more sensitive to aggregate ``nationwide" shocks, increasing the pass-through of both gas prices and nominal exchange rate fluctuations.
This paper was prepared for the 2018 Jackson Hole Economic Policy Symposium. I thank Yuriy Gorodnichenko for his discussion and other symposium participants for their comments. I also thank Manuel Bertolotto, Augusto Ospital, Caroline Coughlin, Mike Brodin, Cesar Sosa, and the team at PriceStats for their help with the data, and Paula Meloni and Maria Fazzolari from the Billion Prices Project for providing excellent research assistance. Financial Disclosure: I am a co-founder and shareholder of PriceStats LLC, a private company that provided some of the proprietary data used in this paper without any requirements to review of the findings prior to their release. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research.
- The frequency of price changes at multi-channel retailers has increased, particularly in sectors with high levels of online...