Information and price dispersion: Theory and evidence

Dieter Pennerstorfer, Philipp Schmidt-Dengler, Nicolas Schutz, Christoph Weiss, Biliana Yontcheva

We examine the relationship between information and price dispersion in the retail gasoline market. We first show that the clearinghouse models in the spirit of Stahl (1989) generate an inverted-U relationship between information and price dispersion. We construct a new measure of information based on precise commuter data from Austria. Regular commuters can freely sample gasoline prices on their commuting route, providing us with spatial variation in the share of informed consumers. We use detailed information on gas station level prices to construct price dispersion measures. Our empirical estimates of the relationship are in line with the theoretical predictions.

Department of Economics
External organisation(s)
Österreichisches Institut für Wirtschaftsforschung (WIFO), Universität Mannheim, Wirtschaftsuniversität Wien (WU)
No. of pages
Publication date
Austrian Fields of Science 2012
502013 Industrial economics
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